Digital economy’s impact on manufacturing upgrading: evidence from China’s provincial panel data analysis

Purpose The purpose of this study is to investigate the impact of digital economy (DE) on China’s manufacturing upgrading (MU), as well as examine the role of human capital (HC) in this process. Design/methodology/approach Using a balanced panel data set comprising annual data from 30 provinces in China for the period between 2011 and 2022, this study uses the fixed effects, mediating effects and threshold effect models to assess the impact of DE development on MU in China. Findings The research findings indicate that: DE has a significant positive impact on the overall upgrading of the MU in China. DE promotes MU through HC. The relationship between the DE and MU exhibits a non-linear characteristic. Moreover, the influence of the DE on MU presents a trend of nonlinear enhancement. When the development of the DE surpasses a certain threshold, its positive impact on MU becomes significantly more pronounced. In regional heterogeneity analysis, DE significantly promotes MU in medium-low gross domestic product (GDP) regions, but its impact is insignificant in high GDP regions. Originality/value This study moves beyond the conventional assumption of a simple linear relationship between the DE and MU, proposing a more complex and realistic model. This study addresses a research gap by investigating the critical yet understudied role of HC as a factor in how the DE drives MU. This study introduces a more economically meaningful method for regional analysis within China by categorising provinces into high-GDP and medium-to-low-GDP groups.