IT Investment and Corporate Performance: Moderating Effects of Regional Digitization

Abstract

Using Chinese listed companies as samples, this study empirically examines the influence of regional digital economy development on the relationship between information technology investment and corporate performance. Based on resource-based theory and core competence theory, the study uses data from all Chinese listed companies from 2016 to 2023 to analyze how information technology investment affects firm performance under different regional digitalization levels. Corporate performance is measured by Tobin’s Q and return on assets. The results show that information technology investment generally has a positive effect on corporate performance, while the relationship exhibits an inverted U-shaped pattern consistent with diminishing marginal returns. Regional digitalization further moderates this relationship through the mechanism of digital knowledge spillover. The moderating effect is more pronounced in the eastern region, where digital infrastructure and digital capability are stronger, than in the western region. To address endogeneity, regression models and fixed-effects models are adopted, and robustness tests are conducted by replacing dependent variables and using lagged explanatory variables.