Abstract: With the rapid development of China’s digital economy, digital transformation has gradually emerged as a novel competitive advantage for enterprises development, playing a crucial role in strategic decision-making for outward direct investment mode. Based on the samples of A-share listed enterprises in China from 2005 to 2020, this paper empirically examines the impact of digital transformation on the mode selection of outward foreign direct investment (OFDI) for Chinese enterprises, and further explores the moderating effect of corporate competitive strategy. The findings show that digital transformation can significantly promote enterprises to choose the cross-border merger & acquisition (M&A) as the investment mode, and this result still holds after considering the endogenous problems and through a series of robustness tests. The moderating effect analysis reveals that the enterprises’ differentiation strategy will strengthen the promoting effect of digital transformation on corporations’ choices of cross-border mergers and acquisitions, however, the promotion effect of the cost leadership strategy on digital transformation is not obvious. The heterogeneity test shows that digital transformation drives enterprises to choose cross-border mergers and acquisitions to enter technology intensive industries, and this investment choice effect is concentrated in state-owned enterprises and enterprises in the eastern region. Based on the above results, the process of digital transformation should be accelerated, and a reasonable corporate strategic planning should be used as an external positive condition to fully leverage the effect of digital transformation on enterprises’ choice of outward direct investment modes. In addition, enterprises should fully consider their own differentiated characteristics and make rational investment mode decisions to achieve high-level open-up.

Key words: digital transformation, competitive strategy, greenfield investment, cross-border M&A;