Analysis of manufacturers’ digital transformation strategies in response to government incentives

Purpose This paper aims to explore the factors influencing governments’ and manufacturers’ decision-making in the context of digital transformation, and to examine the role that government subsidies play in manufacturers’ digital transformation process. Design/methodology/approach This paper considers a game model consisting of the government and the manufacturer to analyze both subjects’ strategies evolutionary path. Equilibrium points and stability conditions are analyzed. Numerical simulations are conducted using Matlab. Findings Results show that benefits and costs of digitalization, government subsidy and oversight of the superior department have a significant impact on both parties. When manufacturer lacks financial support and has low profits, government can appropriately increase subsidy level, which reduces manufacturer’s transition costs, increase its digital benefits, and the government will gain more tax revenue. However, excessive subsidy can create financial burden on government, affecting manufacturer’s interests and hindering the progress of digital transformation process. Originality/value This paper conceptualizes the government as a game player with the goal of maximizing its interests and constructs an asymmetric evolutionary game model to explore the interaction mechanism between the government and manufacturers.