The Impact of Digital Transformation on the Performance of Manufacturing Enterprises

Abstract

Amid the rapid expansion of the digital economy, there remains no clear consensus on whether manufacturers’ adoption of digital initiatives ultimately enhances overall performance. Drawing on panel data of A-share manufacturing firms from 2014 to 2023, this study captures the intensity of digital transformation by measuring the frequency of digital-related keywords disclosed in firms’ annual reports, and systematically examines its consequences for both market performance and financial performance. The empirical results reveal a striking divergence: while digital transformation significantly improves firms’ market performance by enhancing visibility, reputation, and investor recognition, it simultaneously exerts a materially negative effect on financial performance due to high costs, resource misallocation, and implementation frictions. Further heterogeneity analyses indicate that these contrasting effects are more pronounced for state-owned enterprises, which face institutional pressures and resource abundance, and for firms located in economically developed regions, where digital competition and innovation expectations are particularly intense.