IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v14y2022i16p10212-d890621.html
   My bibliography  Save this article

Digital Transformation and Manufacturing Firm Performance: Evidence from China

Author

Listed:
  • Hongtao Wang

    (School of Economics and Management, Xi’an University of Posts and Telecommunications, Xi’an 710061, China)

  • Wencheng Cao

    (School of Economics and Management, Xi’an University of Posts and Telecommunications, Xi’an 710061, China)

  • Fei Wang

    (Business School, Xi’an International Studies University, Xi’an 710128, China)

Abstract

Based on the digital transformation practice of Chinese manufacturing enterprises, this paper sorts out the intrinsic mechanism of digital transformation affecting the performance of manufacturing enterprises systematically, based on the perspective of digital investment, and empirically tests the theoretical hypothesis using an unbalanced panel of China’s A-share listed manufacturing companies in Shanghai and Shenzhen from 2007 to 2020. The findings show that digital transformation enhances manufacturing firm performance significantly, and the conclusions still hold after using dynamic panel models, the instrumental variables approach, and a series of robustness tests; further analysis reveals that this effect is more significant in state-owned enterprises and manufacturing enterprises in regions with a higher degree of marketization. The results of the mediating effect model show that low-cost empowerment and innovation empowerment are important channels to improve the performance of manufacturing enterprises. Accordingly, this paper argues that accelerating the deep integration of digital technology and enterprise development is the key to achieving high-quality development and improving enterprise performance in the context of an uncertain business environment.

Suggested Citation

  • Hongtao Wang & Wencheng Cao & Fei Wang, 2022. "Digital Transformation and Manufacturing Firm Performance: Evidence from China," Sustainability, MDPI, vol. 14(16), pages 1-18, August.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:16:p:10212-:d:890621
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/14/16/10212/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/14/16/10212/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jiatong Yu & Jiajue Wang & Taesoo Moon, 2022. "Influence of Digital Transformation Capability on Operational Performance," Sustainability, MDPI, vol. 14(13), pages 1-20, June.
    2. Lei Guo & Luying Xu, 2021. "The Effects of Digital Transformation on Firm Performance: Evidence from China’s Manufacturing Sector," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    3. Yu, Yubing & Zhang, Justin Zuopeng & Cao, Yanhong & Kazancoglu, Yigit, 2021. "Intelligent transformation of the manufacturing industry for Industry 4.0: Seizing financial benefits from supply chain relationship capital through enterprise green management," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    4. Rongrong Zhou & Decai Tang & Dan Da & Wenya Chen & Lin Kong & Valentina Boamah, 2022. "Research on China’s Manufacturing Industry Moving towards the Middle and High-End of the GVC Driven by Digital Economy," Sustainability, MDPI, vol. 14(13), pages 1-30, June.
    5. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    6. Xiaoyan Teng & Zhong Wu & Feng Yang, 2022. "Research on the Relationship between Digital Transformation and Performance of SMEs," Sustainability, MDPI, vol. 14(10), pages 1-17, May.
    7. Saarikko, Ted & Westergren, Ulrika H. & Blomquist, Tomas, 2020. "Digital transformation: Five recommendations for the digitally conscious firm," Business Horizons, Elsevier, vol. 63(6), pages 825-839.
    8. Xiaoli Wang & Ying Gu & Mahmood Ahmad & Chaokai Xue, 2022. "The Impact of Digital Capability on Manufacturing Company Performance," Sustainability, MDPI, vol. 14(10), pages 1-24, May.
    9. Boachie, Christopher & Mensah, Emmanuel, 2022. "The effect of earnings management on firm performance: The moderating role of corporate governance quality," International Review of Financial Analysis, Elsevier, vol. 83(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Qianqian Guo & Zhifang Su, 2023. "The Application of Industrial Robot and the High-Quality Development of Manufacturing Industry: From a Sustainability Perspective," Sustainability, MDPI, vol. 15(16), pages 1-26, August.
    2. Yang, Jun & Lv, Xinxin & Xu, Xiaohui & Chen, Xiaohua, 2024. "Heterogeneous treatment effects of digital transformation on firms' innovation: Based on BART method," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    3. Zhong, Yuan & Lai, Huisu & Zhang, Liang & Guo, Lixiang & Lai, Xiaobing, 2025. "Does public data openness accelerate new quality productive forces? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1409-1427.
    4. Si Wu & Xiaolong Liu & Yuchen Xiang & Zaiqi Liu & Minhao Fan, 2025. "Does Digital Transformation Affect Outward Foreign Direct Investment Performance? Evidence from China," Sustainability, MDPI, vol. 17(2), pages 1-22, January.
    5. Chenyu Dai & Jianwen Fang, 2024. "Digital Transformation and Non-Financial Performance in Manufacturing," Sustainability, MDPI, vol. 16(12), pages 1-20, June.
    6. Boqiang Lin & Yongjing Xie, 2024. "Impacts of digital transformation on corporate green technology innovation: Do board characteristics play a role?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 1741-1755, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eman F. Attia & Sameh Yassen & Ahmed Chafai & Ahmed Qotb, 2024. "The impact of board gender diversity on the accrual/real earnings management practice: evidence from an emerging market," Future Business Journal, Springer, vol. 10(1), pages 1-18, December.
    2. Xiaobing LAI & Lei QUAN & Chong GUO & Xing GAO, 2023. "Exploring the Digital Era: Has Digital Technology Innovation Reshaped Investment Efficiency in Chinese Enterprises?," Economic Growth Centre Working Paper Series 2302, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    3. Lijuan Tao & Xiaoju Wei & Wenjing Wang, 2023. "Does Enterprise Internal Control Improve Environmental Performance—Empirical Evidence from China," Sustainability, MDPI, vol. 15(13), pages 1-20, June.
    4. Jiajia Liu & Kexin Zhou & Ye Zhang & Fangcheng Tang, 2023. "The Effect of Financial Digital Transformation on Financial Performance: The Intermediary Effect of Information Symmetry and Operating Costs," Sustainability, MDPI, vol. 15(6), pages 1-22, March.
    5. Lai, Xiaobing & Quan, Lei & Guo, Chong & Gao, Xing, 2025. "Exploring the digital era: Has digital technology innovation reshaped investment efficiency in Chinese enterprises?," Research in International Business and Finance, Elsevier, vol. 75(C).
    6. Al-Gamrh, Bakr & Farooq, Umar & Ahsan, Tanveer, 2024. "Beyond the balance sheet: Assessing corporate governance through the Lens of debtholders," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    7. Jing Wang & Zeyu Xing & Rui Zhang, 2023. "AI technology application and employee responsibility," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 10(1), pages 1-17, December.
    8. Wenjing Zu & Guoda Gu & Sihan Lei, 2022. "Does Digital Transformation in Manufacturing Affect Trade Imbalances? Evidence from US–China Trade," Sustainability, MDPI, vol. 14(14), pages 1-14, July.
    9. Nie, Jun & Jian, Xin & Xu, Juanjuan & Xu, Nuo & Jiang, Tangyang & Yu, Yang, 2024. "The effect of corporate social responsibility practices on digital transformation in China: A resource-based view," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 1-15.
    10. Mohammed T. Abusharbeh, 2024. "Technology-Profitability Paradox in Banking Sector: Evidence from Palestine," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14855-14873, September.
    11. Yeon‐Koo Che & Kathryn E. Spier, 2008. "Strategic judgment proofing," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 926-948, December.
    12. Alfred C. Korir & Prof. Thomas Cheruiyot, PhD & Prof. Philip Bii, 2025. "The Effect of Board Tenure and CEO Duality on Firm Performance of Companies Listed in Nairobi’s Stock Exchange," European Journal of Business and Strategic Management, International Peer Review Journals and Books, vol. 10(5), pages 31-43.
    13. Hasan, Iftekhar & Lozano-Vivas, Ana, 2002. "Organizational Form and Expense Preference: Spanish Experience," Bulletin of Economic Research, Wiley Blackwell, vol. 54(2), pages 135-150, April.
    14. Fabbri, Daniela & Menichini, Anna Maria C., 2016. "The commitment problem of secured lending," Journal of Financial Economics, Elsevier, vol. 120(3), pages 561-584.
    15. Xueyan Dong & Jingyu Gao & Sunny Li Sun & Kangtao Ye, 2021. "Doing extreme by doing good," Asia Pacific Journal of Management, Springer, vol. 38(1), pages 291-315, March.
    16. Khémiri, Wafa & Noubbigh, Hédi, 2020. "Size-threshold effect in debt-firm performance nexus in the sub-Saharan region: A Panel Smooth Transition Regression approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 335-344.
    17. Shaikh, Ibrahim A. & O'Brien, Jonathan Paul & Peters, Lois, 2018. "Inside directors and the underinvestment of financial slack towards R&D-intensity in high-technology firms," Journal of Business Research, Elsevier, vol. 82(C), pages 192-201.
    18. Calcagno, R. & Renneboog, L.D.R., 2004. "Capital Structure and Managerial Compensation : The Effects of Renumeration Seniority," Discussion Paper 2004-120, Tilburg University, Center for Economic Research.
    19. Tao Chen & Shuwen Pi & Qing Sophie Wang, 2025. "Artificial Intelligence and Corporate Investment Efficiency: Evidence from Chinese Listed Companies," Working Papers in Economics 25/05, University of Canterbury, Department of Economics and Finance.
    20. Preet Singh & Chitra Singla, 2016. "Executive Stock Options: Will it Work as a Good Governance Mechanism in all Scenarios?," Working Papers id:10985, eSocialSciences.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:14:y:2022:i:16:p:10212-:d:890621. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.