A stitch in time: Digital transformation, internal control and total factor productivity

Digital transformation provides enterprises with new development momenta. Understanding the relationship between digital transformation and total factor productivity (TFP) is essential. This study employs a fixed-effect model and selects all Chinese A-share listed companies from 2007 to 2022 as the research sample. Internal control (IC) is introduced as a mechanistic variable. The results indicate that digital transformation significantly promotes both TFP and the effectiveness of IC. Moreover, effective IC plays a significant mediating role in the relationship between digital transformation and TFP. A heterogeneity analysis reveals that, compared to non-state-owned enterprises, state-owned enterprises can improve TFP more rapidly through digital transformation due to their resource advantages and policy support. On the one hand, these findings help enterprises better align their transformation strategies to maximize the benefits of digital transformation. On the other hand, they provide investors with insights into the transformation potential and future growth prospects of these enterprises.