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The impact of digital innovation on labor share: Evidence from Chinese firms

Year: 2025

Type: article

Abstract: We use data from listed Chinese companies spanning the years 2000-2021 to study the impact of digital innovation on labor share. Our findings reveal a significant role of digital innovation in enhancing firms' labor share, which changes the factor allocation within firms. Mechanistic analysis reveals that digital innovation drives firm growth through innovation spillover effect, productivity enhancing effect, and expansion effect, with internal control costs and outward foreign direct investment acting as moderating factors. Further examination shows that the labor share-enhancing effect of digital innovation is more pronounced in firms with advanced technologies, greater market power, state ownership, and lower financing constraints. Additionally, we find that the relationship between digital innovation and labor share follows a phased pattern, exhibiting an inverted U-shaped trend over time.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2025.104023

Authors: Tingyu Liu, Peng Huang, Qiaoru Wang

Institution: Nanchang University

Language: English

Topic: Digital Economy and Transformation

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: gold

Estimated APC paid: $1,930