Buying Smart: Unpacking the Political Economy in the Partner Selection of China’s Digital Transformation

Despite the reliance of the government on technology firms to implement the digital transformation, little systematic analysis has investigated how governments select their partners. By tracing the evolution of China’s digitalization, we found that partner selection was mainly affected by considerations of project performance, ICT innovations, and perceived security risks. In recent years, local governments like Zhejiang have faced the “impossible trinity” issue when partnering with private technology firms, due to the rising concerns about security risks. The Zhejiang government and a private tech titan found a middle ground by collaboratively forming a new state-owned special-purpose vehicle (SO-SPV) to address this issue. Although the emergence of SO-SPVs has legitimized and strengthened public-private collaboration, it may also reduce its capacity regarding ICT innovation and so bestow on technology firms greater political influence. This research offers insights into the changing dynamics of state-business relationships in the digital era.