Digital technology adoption and the latecomer firms’ catch-up: an empirical study on Chinese manufacturing enterprises

Digital technology has a significant influence on future economic growth. Achieving catch-up in the context of digital development is crucial for firms. However, the mechanisms between firms' digital technology adoption (DTA) and catch-up are underexplored. Based on panel data of A-share listed manufacturing firms in China from 2012 to 2021, this study investigates the impact of DTA on firms' technological catch-up (TC) and market catch-up (MC) from theoretical and empirical perspectives. The following findings are drawn. (1) DTA positively and significantly affects firms' TC and MC, and the results remain valid after using the instrumental variables method, propensity score matching, and other robustness tests. After removing the order-of-magnitude discrepancies and dimensions, DTA had a more significant effect on MC than TC. (2) Dynamic capacity mediates the relationship between DTA and firms' catch-up. (3) The heterogeneity analysis finds that DTA influences TC and MC in state-owned enterprises and high-tech firms more significantly. This study provides a new perspective on firms' catch-up and guides for firms to develop effective DTA and catch-up strategies.