institutional background

Administrative penalties are very important to ensure effective enforcement of laws and regulations. These have traditionally been the main tools employed by Chinese government departments to control the market and maintain a well-organized and reliable market. Its main purpose is to maintain order in the market and foster a culture of honesty and integrity.of Administrative Penalty Law of the People's Republic of China This law was enacted in 1996 and subsequently revised in 2009, 2017, and 2021. This law outlines administrative penalties as “measures taken by administrative organs to punish individuals, corporations, or other organizations that violate administrative regulations in the course of managing their affairs.” By violating rights or enforcing obligations established by law. ”

China is promoting the construction of a comprehensive administrative law enforcement system. Administrative penalty authority is relatively concentrated in these areas. Other administrative bodies have clear powers to impose penalties within their mandate. China has introduced various laws and regulations to promote digital innovation. network security law, data security law, Unfair Competition Prevention Act, electronic commerce lawand the Regulations on the management of blockchain information services. The Ministry of Industry and Information Technology's list of administrative law enforcement matters for 2022 includes a total of 296 cases. Of these, 38 items are related to network security, 15 items are focused on data security, and 4 items are related to personal information protection.

The information disclosure system regarding administrative sanctions is continually being improved. The Interim Regulations on the Disclosure of Information on Administrative Penalties by the Industry and Commercial Administration were introduced in August 2014, in parallel with the Interim Regulations on the Disclosure of Corporate Information, and came into force on October 1 of the same year. In July 2021, the State Administration of Market Regulation Provisions regarding publication of administrative penalty information in market supervision. By disclosing corporate information and administrative penalty information, the main responsibility of companies is strengthened through the mechanism of disclosure, supervision, and restraint. This will accelerate the transformation of the business management department's market supervision mode. Promote the establishment of a corporate integrity system and play the role of supervising and suppressing violations.

Administrative punishment in China is applied systematically and hierarchically, with separate administrative organs performing separate penal functions, and the same central organ and its sending agencies have diverse penal privileges. For example, the PBOC imposes administrative penalties for crimes and violations discovered during law enforcement inspections conducted in the PBOC's name. In addition, the People's Bank branch imposes administrative penalties for crimes and violations occurring within its jurisdiction. In the first half of 2023, PBOC branches imposed 82 fines on financial institutions for violating credit information regulations. The total fine imposed was 44,821,680 yuan. Due to differences in regulation and enforcement, the discretionary scale and enforcement of administrative penalties vary across regions in China, providing an optimal research scenario to analyze BDTI within the context of administrative penalties.

The administrative penalty information on companies published by the National Corporate Information Disclosure System includes basic information such as the name of the company subject to administrative penalty, legal representative (responsible person), location, administrative penalty decision number, and administrative penalty decision number. Type of violation, main facts of violation, grounds for disposition, timing of disposition, type of disposition, reason for disposition, content of administrative disposition, agency imposing administrative disposition, date of penalty, date of announcement of administrative penalty, date of administrative penalty. presentation deadline, etc. Penalties imposed on companies include compliance violations, safety, environmental pollution, traffic violations, illegal occupation, labor-related crimes, and fire safety violations. This study applied all these areas of administrative penalties to the digital technology companies studied.

Development of hypothesis

Administrative penalties are important enforcement mechanisms within formal systems, including laws, regulations, industrial policies, and tax systems, and play a vital role within the institutional environment (Li, 2019). Administrative penalties therefore contribute significantly to establishing clear institutional norms and guidelines. These penalties can have a significant impact not only on the efficiency of regime enforcement, but also on the binding force of the regime and the dissemination of information related to the regime's procedures. Fair and regulated market competition can reduce the duration and economic costs associated with firms' innovation processes, promote collaborative innovation among firms, and enhance innovation within sectors (Yu et al. , 2021). Digital technology has positive externalization and spillover effects (Qi et al., 2022). The high threshold, high cost, and imitability of digital innovation ( Firk et al., 2021 ) pose challenges for companies to achieve economic benefits from innovation activities ( Teece, 2018 ). Strengthening compliance will increase market participants' confidence that the results of the BDTI in which they plan to invest will be legally protected, increasing their appetite and desire to invest. The implementation of administrative penalties facilitates the development and dissemination of institutional norms within the region, thereby supporting innovation incentives, protection, synergies, and the dissemination of BDTI.

Classic regulatory economic theory shows that regulations and fines imposed on firms can create incentives. Such incentives arise not only from economic losses from penalties but also from the loss of social capital. Regulatory fines are known as reputational fines and are faced by listed companies and their executives (Li et al., 2023). These penalties affect funding scale, funding costs, profits, and risk-taking behavior (Zhu, 2020; Zhao and Gao, 2023). Government regulatory actions may also affect companies that partner with penalized companies (Xin et al., 2019). Immediately after receiving an administrative penalty, reprimanded companies will face increased external scrutiny and stricter regulatory measures. As a result, we plan to allocate additional resources to improving our corporate governance and performance in order to restore our reputation. Additionally, organizations prioritize strengthening innovation, thereby increasing their proficiency in digital innovation and increasing their visibility as “high tech.” All these factors contribute to increasing the capacity and effectiveness of digital technologies for innovation purposes.

The concept of deterrence, first introduced by Becker (1968), has been widely applied in economic analysis. Administrative penalties act as a deterrent and affect the corporate governance, risk management, and investment behavior of punished companies (Chu and Fang, 2021). This will curb reactive violations by penalized companies, standardize digital innovation activities within the industry, and increase the level of big data innovation in the region. Companies operating in the same industry or region will be indirectly hindered by regulatory penalties to modify their actions related to violations (Xue et al., 2017). Companies also respond to disclosure information regarding administrative penalties. When government agencies implement DTAP, they will provide guidance to businesses on how to legally implement digital technologies, including big data technologies, and which applications are illegal. This will help market participants understand the legal framework and establish stable innovation prospects. DTAP can facilitate the adoption of innovations by communicating relevant policy signals, creating penalty expectations, governing business behavior, and strengthening market discipline in this area.

Based on the institutional norms, incentives, and deterrent effects of DTAP, we propose H1.

H1: DTAP can promote BDTI.

A strengthened business environment, increased long-term innovation investment by companies, and the formation of orderly competition within the market facilitated by DTAP all form an essential basis for business model innovation in the digital economy. The introduction of administrative penalties will also serve to encourage the growth of new industries in the digital economy. BDTI has an industry cluster effect, where companies and organizations within the same geographic area share resources, promote information interoperability, and create market synergies and other economies of scale, thereby creating new Facilitate the development of digital economy formats. The monopoly of a few large companies is not conducive to innovation in the industry (Yu et al., 2021). It is essential not only to form and expand new business forms in the digital economy, but also to avoid “winner-take-all” scenarios that hinder the survival and profitability of new innovation targets. The increase in new digital economy business forms will expand the range of BDTI application scenarios, allowing these enterprises to collaborate and deeply integrate through informatization. You can also develop new forms of business while completing your own transformations and upgrades. It is expected that industrial collaboration effects and industrial fusion effects will promote BDTI. Therefore, we propose Hypothesis 2.

H2: DTAP contributes to the development of new business formats and promotes BDTI.

The improvement of the business environment facilitated by DTAP, the increase in long-term innovation investment by enterprises, and the formation of orderly competition patterns in the market will accelerate the digitalization of the industry. In China, the entire government is actively promoting the growth of the digital economy and the digital industrial revolution. Therefore, DTAP plans to further promote the digitalization of the industry. At the same time, increased government control over digital technologies will better protect digital artifacts. This will have a favorable effect on enterprises by strengthening their digital transformation efforts and promoting the digitalization of the industry. Intellectual property rights (IPR) protection also frees up financing constraints (Ang et al., 2014; Wu and Tang, 2016), thereby enabling companies to scale up their investments in digitalization. According to the findings of Mei (2022), the digitization and data mining of diverse elements such as labor, land, capital, technology, management, and knowledge will create new types of data productivity and accelerate the digitalization of industries. Promote. The latter provides rich data resources, increases the demand for BDTI, diversifies application scenarios, and thereby fosters innovation. Therefore, we propose Hypothesis 3.

H3: DTAP contributes to industrial digitalization and promotes BDTI (Figure 1).

Figure 1: Roadmap of the mechanisms by which DTAP affects BDTI.
Figure 1

This figure shows the direct and indirect channels by which DTAP affects BDTI.

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