Digital transformation and cross-regional investment: Evidence from China

This paper investigates how digital transformation affects firms’ cross-regional investment. Utilizing the establishment of new cross-regional subsidiaries by Chinese A-share listed companies between 2012 and 2024 as a proxy variable, we found that both the disclosure of digital transformation and the implementation of digital technologies have significant positive impacts on cross-regional investments. That is, both the “talking” and “action” of digital transformation can promote the establishment of new cross-regional subsidiaries by enterprises. In terms of the mechanism, digital disclosure mainly alleviates information asymmetry and reduces transaction costs, while digital technology implementation mainly enhances organizational capabilities to promote firms’ cross-regional investments. The results of the heterogeneity analysis are consistent with the mechanism logic. Cross-sectional tests reveal distinct boundary conditions for each dimension: the effect of digital disclosure is weaker in more institutionally developed regions but stronger for SOEs facing higher local protectionism; the effect of digital technology implementation is negatively moderated by firms’ existing organizational and dynamic capabilities, though specialized digital talent investment reverses this attenuation. Our findings maintain robustness through endogenous tests and additional checks. This research contributes to the field by enhancing our understanding of the microeconomic implications of digital transformation and offering fresh perspectives to the theory of firms’ cross-regional investment decisions.