An Investigation of the Inverted U-Shaped Relationship between Digital Transformation and Top Management-Employee Pay Dispersion

Abstract

Abstract: Grounded on the optimal contract and organizational change perspectives, this study investigates the effect of digital transformation on top management (TM)-employee pay dispersion. Based on the data from Chinese listed companies between 2007 and 2020, the results reveal an inverted U-shaped relationship between digital transformation and TM-employee pay dispersion. Besides, this inverted U-shaped relationship is strengthened by enterprise-employee relationship, that is, the stronger the enterprise-employee relationship, the steeper the inverted U-shaped relationship. Further deconstruction analysis shows that TM pay increases linearly with increasing levels of digital transformation, whereas employee pay decreases first and then increases with increasing levels of digital transformation, showing a U-shaped relationship. Our findings deepen the understanding of common prosperity in digital transformation.

Key words: digital transformation, TM-employee pay dispersion, enterprise-employee relationship, common prosperity

Li Conggang, Chen Meng, Xu Rong. An Investigation of the Inverted U-Shaped Relationship between Digital Transformation and Top Management-Employee Pay Dispersion[J]. Management Review, 2025, 37(6): 27-39.

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