Digital Innovation and Manufacturing Productivity Growth in a Sustainability-Oriented Transformation Context: Evidence from China

Improving productivity under resource and environmental constraints is a key challenge for sustainability-oriented transformation in manufacturing. Using panel data from 30 Chinese provinces during the period 2010–2024, this study examines how regional digital innovation capability is associated with manufacturing total factor productivity at the provincial level. A multidimensional digital innovation index is constructed using the entropy-weighting method, while manufacturing total factor productivity (TFP) is measured using the DEA–Malmquist index. In this study, conventional manufacturing TFP is treated as a productivity-oriented proxy within a sustainability-oriented transformation context, rather than as a direct measure of environmental performance. The empirical framework applies a two-way fixed-effects model and is complemented by supplementary instrumental-variable estimation, mediation analysis, and threshold regression to examine transmission channels and nonlinear effects. The results indicate that digital innovation capability is positively associated with manufacturing TFP, with stronger associations observed in regions that have more developed digital and innovation foundations. Decomposition results show that the gains are mainly related to technological progress rather than short-term efficiency improvements, suggesting that digitalization is reflected primarily through innovation-led upgrading. Mechanism tests further show that improvements in R&D efficiency, data element allocation, and human capital structure play important mediating roles. A significant threshold effect is also observed: When the share of digital-skilled labor exceeds a critical level, the productivity return from digital innovation increases markedly. These findings underscore the role of digital innovation and digital maturity in supporting manufacturing productivity upgrading within a sustainability-oriented transformation context and imply that policy should prioritize coordinated investment in digital infrastructure, data governance, and digital skills development.