Digital transformation and enterprise employment

Digital transformation refers to the process through which businesses adopt digital technologies to drive change. However, how digital transformation changes the size or the structure of enterprise employment remains unknown. Based on a textual analysis of the annual reports of Chinese A-share listed companies, we develop a new approach to measure the adoption of digital technologies at the enterprise level, and deeply explore the relation between digital transformation and enterprise employment. Overall, our results show that the adoption of digital technologies such as artificial intelligence, big data, cloud computing or blockchain significantly shrinks firms’ total employment, which holds true after tackling endogeneity biases and a series of robustness checks. Comparing the heterogeneous effects across industries and enterprises, we further reveal that the employment reductions are greater among manufacturing firms, enterprises under less competitive pressures, and non-state-owned businesses. More importantly, digital transformation has the potential to upgrade the structure of enterprise employment through increasing the proportion of well-educated and highly-skilled workers. The conclusion of this paper provides implications that we should promote digital transformation in an active but steady way, taking advantage of digital technology dividends while mitigating the shock of technological unemployment.