Employee Representation and Firm Digital Transformation

ABSTRACT While digital transformation has advanced rapidly within firms, there is limited understanding of the role played by the labor force along the progress. Using the Chinese private enterprises survey dataset, this study investigates the impact of employee representation on firm digital transformation. The study reveals that firms with established labor union or worker representative congress exhibit higher levels of digital transformation. The study further explores two competing mechanisms, internal protection and labor force technology complementarity, to explain why labor embraces digital transformation. The results identify the labor force technology complementarity as the underlying channel, highlighting the significant empowering effect of employee representation on labor. The study thus provides evidence to understand the importance of labor engagement in shaping the future labor landscape.