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Informatization, characterized by digitization, networking, and intelligence, has swept the world (Horoshko et al., 2021). The digital economy has, therefore, become a critical area of competition between major economies (Zhao & Zhou, 2022). At the same time, developing the digital economy has become a strategic choice for China in efforts to access the benefits of the latest iteration of the technological and industrial revolution (Pan et al., 2022). As an essential component of the digital economy, the digital transformation of enterprises can lead to the creation of higher value-added products and services, as well as momentum for development (Popkova et al., 2022). This, thereby, expands the development space of enterprises. Moreover, COVID-19 has forced enterprises to drive the digital transformation, which has improved traditional business models (Guo & Xu, 2021).
The relationship between digital transformation and enterprises has attracted widespread attention from scholars and policymakers (Daradkeh, 2021; Vu & Hartley, 2022). However, as the digital transformation of some Chinese enterprises remains in its early stages, they may struggle with financial constraints, high business risks, and low technological innovation (Li & Yang, 2021). Uncertainty from frequent changes in economic policy can reduce the accuracy of enterprise decisions. These factors will present challenges to enterprise development. Therefore, research should explore and identify transmission mechanisms between digital transformation and enterprise development to address with the many challenges.
To explore how digital transformation impacts enterprise development in China, this study investigates the direct impact of digital transformation on enterprise development and varying degrees of development. It then analyzes the mediating and moderating effects. By doing so, the study makes several contributions to the literature. First, it constructs a comprehensive index of enterprise development based on profitability, growth capacity, asset utilization efficiency, and debt-paying ability. These provide a reference for accurate assessment of enterprise development. Second, based on the perspective of cash flow, the mechanisms of digital transformation on enterprise development are investigated. It considers an enterprise’s financial constraints, business risks, and technological innovation. Third, this study incorporates China’s economic policy uncertainty into the research framework to show the impact of digital transformation on enterprise development in the face of uncertainty.
This study, therefore, is of great theoretical importance to fully reveal the internal transmission mechanism and external influence mechanism of digital transformation on enterprise development. It can also provide a reference for enterprises to deploy digital transformation projects according to their unique characteristics.
The remainder of the article is organized as follows. The following section includes a literature review of theoretical mechanisms and research hypotheses. This is followed by a description of the research design and descriptive statistics. The subsequent section depicts the basic empirical findings, followed by the investigation of the effect of digital transformation on enterprise development at various stages. After that, the article explores mechanisms for digital transformation that impact enterprise development. Finally, the study provides a discussion and conclusion.