Staged digital transformation and firms’ total factor productivity: evidence from Chinese cultural firms

This study explores the effects of digital transformation (DT) on firms’ total factor productivity (TFP) across the digital technology application (DTA) stage and digital business model innovation (DBMI) stage. Using a sample of 245 Chinese listed cultural firms from 2011 to 2022, we examine how DT impacts TFP differently across these stages. The results show that DT significantly enhances firms’ TFP in both the DTA and DBMI stages. However, productivity gains materialize only after firms reach the transformation threshold in both stages. Moreover, the threshold for the DTA stage is higher than that for the DBMI stage. In the DTA stage, DT improves firms’ TFP by enhancing their core production capabilities and specialization. In the DBMI stage, DT affects firms’ TFP through improved operational efficiency and financial efficiency. Furthermore, during the DTA stage, larger firms experience stronger TFP gains, while smaller firms benefit more in the DBMI stage. In the DTA stage, the positive impact of DT on TFP is similar for firms with and without government subsidies. In the DBMI stage, however, the impact of DT is more pronounced for firms without subsidies. Across both stages, firms in regions with a better digital financial environment achieve greater productivity gains from DT.