Differential effects of digital transformation on the profitability and marketability of manufacturing firms

Purpose Despite the growing importance of digital transformation, few studies have investigated its precise effects on firm efficiency. This research explores the differential effects of digital transformation on the profitability and marketability of manufacturing firms. Design/methodology/approach We analyze the relationship between digital transformation and firm efficiency using a dataset of Chinese-listed manufacturing firms from 2011 to 2023. Findings The results indicate that digital transformation improves marketability and has a U-shaped relationship with profitability. Moreover, industry competition amplifies the positive effect of digital transformation on marketability but attenuates its U-shaped effect on profitability. In contrast, media coverage attenuates the positive effect of digital transformation on marketability and amplifies its U-shaped effect on profitability. Originality/value While the existing conclusion about the efficiency of digital transformation is inconsistent, this research enriches the literature on digital transformation and provides insights for improving firm efficiency in terms of both profitability and marketability.