How Does Digital Transformation Affect Total Factor Productivity: Firm-Level Evidence from China

Shiguang Li () and Yixiang Tian
Additional contact information
Shiguang Li: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 610054, China
Yixiang Tian: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 610054, China

Sustainability, 2023, vol. 15, issue 12, 1-17

Abstract: After the 2008 financial crisis, companies in China begun paying more attention to sustainable development. This article attempts to examine whether and how digital transformation affects total factor productivity (TFP) at the firm-level. Using 2913 listed companies in China from 2012 to 2018, this study finds that digital transformation is positively associated with corporate TFP in China. Our explanatory variable of firm-level digitalization index is constructed via text analysis methods. After a series of robustness checks and different attempts that mitigate endogeneity concerns, our findings remain valid. However, traditional information and communication technologies (ICT) cannot improve corporate TFP. Further analyses of three plausible channels indicate that digital technologies improve TFP primarily through cost reduction and human substitution rather than supervision advantage. The results indicate that firms achieve actual benefits from the digital transformation, and how digital transformation improve the sustainable development. This study could serve as a policy inspiration for other developing countries.

Keywords: digital transformation; sustainable development; total factor productivity; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.mdpi.com/2071-1050/15/12/9575/pdf (application/pdf)
https://www.mdpi.com/2071-1050/15/12/9575/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:15:y:2023:i:12:p:9575-:d:1171039

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().