Corporate Digital Transformation and Capacity Utilization Rate: The Functionary Path via Technological Innovation

Yang Liu, Hongyan Zhang, Xiang Gao and Yanxiang Xie ()
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Yang Liu: Business School, Liaocheng University, Liaocheng 252000, China
Hongyan Zhang: Business School, Liaocheng University, Liaocheng 252000, China
Xiang Gao: Research Center of Finance, Shanghai Business School, Shanghai 200235, China
Yanxiang Xie: School of Finance, Nankai University (Jinnan Campus), Tianjin 300350, China

IJFS, 2025, vol. 13, issue 3, 1-31

Abstract: The rapid development of digital technology is reshaping the global economic landscape. However, its impact on firms’ capacity utilization rate (CUR), particularly through technological innovation, remains unclear. This study investigates this issue by developing an endogenous growth model that connects digital technology to CUR. The empirical analysis is based on data from Chinese A-share manufacturing firms. The methods employed include quantile regression, instrumental variable techniques, and various tests to explore underlying mechanisms. CUR is calculated using a special model that looks at random variations, and digital transformation is assessed using text analysis powered by machine learning. The findings indicate that digital transformation significantly enhances CUR, especially for firms with average capacity utilization levels, but has a limited effect on low- and high-end firms. Moreover, technological innovation mediates this relationship; however, factors like “double arbitrage” (involving policy and capital markets) and “herd effects” tend to prioritize quantity over quality, which constrains innovation potential. Improvements in CUR lead to enhanced firm performance and productivity, generating industry spillovers and demonstrating the broader economic externalities of digitalization. This study uniquely applies endogenous growth theory to examine the role of digital transformation in optimizing CUR. It introduces the “quantity-quality” technology innovation paradox as a crucial mechanism and highlights industry spillovers to address overcapacity while offering insights for fostering sustainable economic and social development in emerging markets.

Keywords: digital transformation; capacity utilization rate; technological innovation; industry spillover effect (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
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