Digitalization and firm centralization: A quasi-natural experiment based on the "Broadband China" policy

This study investigates whether and how the digitalization affects firm's organizational empowerment structure. To identify causality, we introduce the DID strategy based on the natural experiment, i.e. the "Broadband China" pilot policy, which aim to expand information infrastructure coverage of Chinese cities and improve firm digitalization level. We find that the digitalization has a positive effect on firms' centralization levels by decreasing their communication costs and improving their productivity. Moreover, this positive effect is more pronounced in SOEs and firms with lower agency costs.