Navigating economic policy uncertainty: The role of digital transformation in export product switching

Xiaohui Xu and Ruizhen Dong

Asian Economic Journal, 2024, vol. 38, issue 4, 435-455

Abstract: This study explores two key objectives: examining the impact of economic policy uncertainty (EPU) on export product switching and assessing the role of digital transformation in moderating this relationship. Analyzing data from Chinese A‐share listed enterprises between 2007 and 2016, we find that heightened EPU significantly accelerates export product switching, leading firms to reduce both the scope (number of products exported) and quantity of their exports. Digital transformation plays a crucial role in mitigating the adverse effects of EPU by enhancing information‐processing capabilities and reducing information asymmetry. This strategic shift encourages firms to focus on core products while reducing non‐core product exports. The moderating effect of digital transformation is particularly significant in state‐owned enterprises (SOEs) and firms with weak internal corporate governance. These findings underscore the critical role of digital transformation in helping firms navigate uncertain economic environments, offering valuable insights for policymakers and business leaders aiming to enhance export performance through digital innovation.

Date: 2024
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