Digital economy, dual innovation capability and enterprise labor productivity

Manjiang Xing, Chi Gong, Gyu-Hyen Moon and Xiaohong Ge

International Review of Financial Analysis, 2025, vol. 101, issue C

Abstract: While digital economy development has emerged as a crucial driver of enterprise performance, existing research offers limited insights into how firms' innovation capabilities shape their ability to translate digital advancement into productivity gains. This gap is particularly significant given the varying success rates of digital transformation initiatives across enterprises. Drawing on organizational ambidexterity theory and utilizing panel data from Chinese listed companies (2010−2022), this study investigates how dual innovation capability moderates the relationship between digital economy development and enterprise labor productivity. Through comprehensive econometric analysis incorporating instrumental variables and multiple robustness checks, we find that digital economy development significantly enhances enterprise labor productivity, with this effect strengthened by both exploitative and exploratory innovation capabilities. Our heterogeneity analysis reveals that these relationships vary meaningfully across industry factor intensities and firm life cycle stages, with technology-intensive industries and growth-stage firms demonstrating superior ability to leverage digital resources. The findings extend digital transformation theory by illuminating the critical role of innovation capabilities in maximizing productivity gains from digital advancement, while offering practical insights for enterprises pursuing digital transformation strategies.

Keywords: Digital economy development; Labor productivity; Dual innovation capability; Factor intensity; Firm life cycle; Enterprise digital transformation (search for similar items in EconPapers)
JEL-codes: D24 L25 M15 O33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:101:y:2025:i:c:s1057521925000924

DOI: 10.1016/j.irfa.2025.104005

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