IDEAS home Printed from https://ideas.repec.org/a/sae/sagope/v14y2024i3p21582440241281862.html
   My bibliography  Save this article

Impact of Digitalization on Investment and Productivity of Manufacturing Industry: Evidence from China

Author

Listed:
  • Huwei Wen
  • Yupeng Liu
  • Yutong Liu

Abstract

The global economy is accelerating its transformation from an industrial economy to a digital economy, and the digital transformation of the manufacturing industry has become an important trend worldwide. Based on China’s provincial panel data from 2004 to 2020, this study uses a dynamic panel model to investigate the role of digitization in the transformation and upgrading of the manufacturing industry. The empirical results show that digitalization has significantly improved the green total factor productivity (GTFP) of the manufacturing industry, while it has significantly inhibited investment in fixed assets. The analysis of regional heterogeneity shows that in areas with scarce labor, abundant human capital, and areas with high innovation investment, digitalization has a larger effect on promoting productivity and inhibiting the expansion of investment scale. In the regions with more outward foreign direct investment, the effect of digitalization on improving productivity is insignificant, and the effect on inhibiting the expansion of investment scale is larger, implying that there is a risk of industrial hollowing out. Further analysis finds that digitalization improves the GTFP of regional manufacturing through mechanisms such as enhancing innovation capabilities, promoting industrial upgrading, and improving investment efficiency, and reduces manufacturing fixed asset investment through channels such as human capital upgrades and rising labor costs.

Suggested Citation

  • Huwei Wen & Yupeng Liu & Yutong Liu, 2024. "Impact of Digitalization on Investment and Productivity of Manufacturing Industry: Evidence from China," SAGE Open, , vol. 14(3), pages 21582440241, September.
    • Handle: RePEc:sae:sagope:v:14:y:2024:i:3:p:21582440241281862
    DOI: 10.1177/21582440241281862
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/21582440241281862
    Download Restriction: no
    File URL: https://libkey.io/10.1177/21582440241281862?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Singh, Shiwangi & Sharma, Meenakshi & Dhir, Sanjay, 2021. "Modeling the effects of digital transformation in Indian manufacturing industry," Technology in Society, Elsevier, vol. 67(C).
    2. Loren Brandt & Johannes Van Biesebroeck & Luhang Wang & Yifan Zhang, 2019. "WTO Accession and Performance of Chinese Manufacturing Firms: Corrigendum," American Economic Review, American Economic Association, vol. 109(4), pages 1616-1621, April.
    3. Zheng-Xin Wang & Peng Hao & Pei-Yi Yao, 2017. "Non-Linear Relationship between Economic Growth and CO 2 Emissions in China: An Empirical Study Based on Panel Smooth Transition Regression Models," IJERPH, MDPI, vol. 14(12), pages 1-11, December.
    4. Gao, Jing & Zhang, Wanfei & Guan, Tao & Feng, Qiuhong & Mardani, Abbas, 2023. "The effect of manufacturing agent heterogeneity on enterprise innovation performance and competitive advantage in the era of digital transformation," Journal of Business Research, Elsevier, vol. 155(PA).
    5. Florina Pinzaru & Alina Mihaela Dima & Alexandra Zbuchea & Zoltan Veres, 2022. "Adopting Sustainability and Digital Transformation in Business in Romania: A Multifaceted Approach in the Context of the Just Transition," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 24(59), pages 1-28.
    6. Loren Brandt & Johannes Van Biesebroeck & Luhang Wang & Yifan Zhang, 2017. "WTO Accession and Performance of Chinese Manufacturing Firms," American Economic Review, American Economic Association, vol. 107(9), pages 2784-2820, September.
    7. Que, Wei & Zhang, Yabin & Liu, Shaobo, 2018. "The spatial spillover effect of fiscal decentralization on local public provision: Mathematical application and empirical estimation," Applied Mathematics and Computation, Elsevier, vol. 331(C), pages 416-429.
    8. Wen, Huwei & Wen, Changyong & Lee, Chien-Chiang, 2022. "Impact of digitalization and environmental regulation on total factor productivity," Information Economics and Policy, Elsevier, vol. 61(C).
    9. Zhu, Bangzhu & Zhang, Mengfan & Zhou, Yanhua & Wang, Ping & Sheng, Jichuan & He, Kaijian & Wei, Yi-Ming & Xie, Rui, 2019. "Exploring the effect of industrial structure adjustment on interprovincial green development efficiency in China: A novel integrated approach," Energy Policy, Elsevier, vol. 134(C).
    10. Zhou, Ya & Shan, Yuli & Liu, Guosheng & Guan, Dabo, 2018. "Emissions and low-carbon development in Guangdong-Hong Kong-Macao Greater Bay Area cities and their surroundings," Applied Energy, Elsevier, vol. 228(C), pages 1683-1692.
    11. Anwar, Sajid & Sun, Sizhong, 2018. "Foreign direct investment and export quality upgrading in China's manufacturing sector," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 289-298.
    12. David H. Autor, 2015. "Why Are There Still So Many Jobs? The History and Future of Workplace Automation," Journal of Economic Perspectives, American Economic Association, vol. 29(3), pages 3-30, Summer.
    13. Yang Liu & Yanlin Yang & Huihui Li & Kaiyang Zhong, 2022. "Digital Economy Development, Industrial Structure Upgrading and Green Total Factor Productivity: Empirical Evidence from China’s Cities," IJERPH, MDPI, vol. 19(4), pages 1-23, February.
    14. Wu, Ning & Liu, ZuanKuo, 2021. "Higher education development, technological innovation and industrial structure upgrade," Technological Forecasting and Social Change, Elsevier, vol. 162(C).
    15. Gefu Liang & Dajia Yu & Lifei Ke, 2021. "An Empirical Study on Dynamic Evolution of Industrial Structure and Green Economic Growth—Based on Data from China’s Underdeveloped Areas," Sustainability, MDPI, vol. 13(15), pages 1-16, July.
    16. Petia Topalova & Amit Khandelwal, 2011. "Trade Liberalization and Firm Productivity: The Case of India," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 995-1009, August.
    17. Orlic, Edvard & Hashi, Iraj & Hisarciklilar, Mehtap, 2018. "Cross sectoral FDI spillovers and their impact on manufacturing productivity," International Business Review, Elsevier, vol. 27(4), pages 777-796.
    18. Matthess, Marcel & Kunkel, Stefanie, 2020. "Structural change and digitalization in developing countries: Conceptually linking the two transformations," Technology in Society, Elsevier, vol. 63(C).
    19. Zhou, Fengxiu & Wen, Huwei & Lee, Chien-Chiang, 2022. "Broadband infrastructure and export growth," Telecommunications Policy, Elsevier, vol. 46(5).
    20. Thuyuyen H. Nguyen & Michael Newby & Michael J. Macaulay, 2015. "Information Technology Adoption in Small Business: Confirmation of a Proposed Framework," Journal of Small Business Management, Taylor & Francis Journals, vol. 53(1), pages 207-227, January.
    21. Wen, Huwei & Zhong, Qiming & Lee, Chien-Chiang, 2022. "Digitalization, competition strategy and corporate innovation: Evidence from Chinese manufacturing listed companies," International Review of Financial Analysis, Elsevier, vol. 82(C).
    22. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
    23. Fan Yang & Yanming Sun & Yuan Zhang & Tao Wang, 2021. "Factors Affecting the Manufacturing Industry Transformation and Upgrading: A Case Study of Guangdong–Hong Kong–Macao Greater Bay Area," IJERPH, MDPI, vol. 18(13), pages 1-14, July.
    24. Gereffi, Gary, 1999. "International trade and industrial upgrading in the apparel commodity chain," Journal of International Economics, Elsevier, vol. 48(1), pages 37-70, June.
    25. ElMassah, Suzanna & Mohieldin, Mahmoud, 2020. "Digital transformation and localizing the Sustainable Development Goals (SDGs)," Ecological Economics, Elsevier, vol. 169(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. M. A. Karim & M. M. Islam & Omid Motamedisedeh, 2025. "Toward Sustainable Performance: The Role of Competence and Quality Practices in Manufacturing," Sustainability, MDPI, vol. 17(10), pages 1-28, 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. Shihai Liu & Jinsong Kuang & Dezhi Ding & Dag Øivind Madsen & Xiaofei Shi & Xianyang Fan, 2024. "Low-carbon governance, fiscal decentralization, and enterprise green development: Evidence from China," PLOS ONE, Public Library of Science, vol. 19(3), pages 1-27, March.
    2. Wang, Bo & Wang, Jianda, 2025. "China’s green digital era: How does digital economy enable green economic growth?," Innovation and Green Development, Elsevier, vol. 4(1).
    3. Baccini, Leonardo & Impullitti, Giammario & Malesky, Edmund J., 2019. "Globalization and state capitalism: Assessing Vietnam's accession to the WTO," Journal of International Economics, Elsevier, vol. 119(C), pages 75-92.
    4. Pierre Bachas & Matthew Fisher-Post & Anders Jensen & Gabriel Zucman, 2022. "Globalization and Factor Income Taxation," Working Papers halshs-03693211, HAL.
    5. Maria Bas & Vanessa Strauss-Kahn, 2024. "Lower prices or higher quality? Firms’ response to increased competition following trade liberalization," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(2), pages 279-309, May.
    6. Greenland, Andrew & Ion, Mihai & Lopresti, John & Schott, Peter K., 2024. "Using equity market reactions to infer exposure to trade liberalization," Journal of International Economics, Elsevier, vol. 152(C).
    7. Bas, Maria & Strauss-Kahn, Vanessa, 2015. "Input-trade liberalization, export prices and quality upgrading," Journal of International Economics, Elsevier, vol. 95(2), pages 250-262.
    8. Chen, Cheng & Steinwender, Claudia, 2021. "Import competition, heterogeneous preferences of managers, and productivity," Journal of International Economics, Elsevier, vol. 133(C).
    9. Brugués, Felipe & Kikkawa, Ayumu Ken & Mei, Yuan & Robles, Pablo, 2025. "The impact of NAFTA on prices and competition: Evidence from Mexican manufacturing plants," Journal of International Economics, Elsevier, vol. 155(C).
    10. Lu, Jiankun & Zhang, Hongsheng & Meng, Bo, 2021. "Corruption, firm productivity, and gains from import liberalization in China," Economic Modelling, Elsevier, vol. 101(C).
    11. Liu, Mengdi & Tan, Ruipeng & Zhang, Bing, 2021. "The costs of “blue sky”: Environmental regulation, technology upgrading, and labor demand in China," Journal of Development Economics, Elsevier, vol. 150(C).
    12. repec:zbw:bofitp:2019_007 is not listed on IDEAS
    13. Cali,Massimiliano & Le Moglie,Marco & Presidente,Giorgio, 2021. "Gain without Pain ? Non-Tariff Measures, Plants’ Productivity and Markups," Policy Research Working Paper Series 9654, The World Bank.
    14. Li, Juncheng & Qin, Xiuting & Tang, Jian & Yang, Lu, 2022. "Foreign trade and innovation sustainability: Evidence from China," Journal of Asian Economics, Elsevier, vol. 81(C).
    15. Bas, Maria & Paunov, Caroline, 2021. "Disentangling trade reform impacts on firm market and production decisions," European Economic Review, Elsevier, vol. 135(C).
    16. Mao, Qilin & Sheng, Bin, 2017. "The impact of tariff reductions on firm dynamics and productivity in China: Does market-oriented transition matter?," China Economic Review, Elsevier, vol. 45(C), pages 168-194.
    17. Luosha Du & Ann Harrison & Gary Jefferson, 2022. "FDI Spillovers and Industrial Policy: The Role of Tariffs and Tax Holidays," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 9, pages 215-232, World Scientific Publishing Co. Pte. Ltd..
    18. Amiti, Mary & Dai, Mi & Feenstra, Robert C. & Romalis, John, 2020. "How did China's WTO entry affect U.S. prices?," Journal of International Economics, Elsevier, vol. 126(C).
    19. Zhang, Ming & Zhao, Yingxue, 2023. "Does environmental regulation spur innovation? Quasi-natural experiment in China," World Development, Elsevier, vol. 168(C).
    20. Defever, Fabrice & Imbruno, Michele & Kneller, Richard, 2020. "Trade liberalization, input intermediaries and firm productivity: Evidence from China," Journal of International Economics, Elsevier, vol. 126(C).
    21. Michele Imbruno, 2022. "Export adjustment to input trade liberalization: The role of import wholesaling services," Review of International Economics, Wiley Blackwell, vol. 30(3), pages 764-795, August.

    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:sae:sagope:v:14:y:2024:i:3:p:21582440241281862. 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: SAGE Publications (email available below). General contact details of provider: .

    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.