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

Author

Listed:
  • 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
    Postdoctoral Workstation of Tianjin Rural Commercial Bank, Tianjin 300203, China)

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.

Suggested Citation

  • Yang Liu & Hongyan Zhang & Xiang Gao & Yanxiang Xie, 2025. "Corporate Digital Transformation and Capacity Utilization Rate: The Functionary Path via Technological Innovation," IJFS, MDPI, vol. 13(3), pages 1-31, August.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:3:p:144-:d:1719842
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    References listed on IDEAS

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    1. James D. Dana Jr. & Eugene Orlov Jr., 2014. "Internet Penetration and Capacity Utilization in the US Airline Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 106-137, November.
    2. Costa Climent, Ricardo & Haftor, Darek M., 2021. "Business model theory-based prediction of digital technology use: An empirical assessment," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
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