Promoting enterprise productivity: The role of digital transformation

Abstract

This study employs textual analysis to assess enterprise digitalization. Moreover, it explores the effect of firm digital transformation (DT) on productivity using data from listed enterprises in China from 2007 to 2020. Our empirical findings point to a facilitation effect between firm-level DT and productivity, which is stronger in downstream firms. Mechanism analysis shows that such increase in productivity is driven mainly by the positive effect of firm DT on technological innovation, human capital, operating capability, and investment efficiency. Further investigation reveals that promoting firm productivity through DT can boost profitability. The findings can help us better understand the economics of firm DT and therefore point to an important policy implication for increasing enterprise productivity.

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