Decoding the information technology productivity paradox: the U-shaped role of digital transformation in Chinese manufacturing enterprises

This study aims to decode the IT productivity paradox within China’s manufacturing sector by examining the nonlinear moderating role of digital transformation and its contextual boundaries. Using panel data from Chinese listed manufacturing firms from 2016 to 2020, we construct a moderated mediation model combined with two-stage least squares and bidirectional fixed effects. Integrating upper echelons theory, we analyze CEO characteristics as key contingency factors. Empirical results confirm the manifestation of the IT productivity paradox in China’s manufacturing industry. Digital transformation exhibits a U-shaped moderating effect on the relationship between IT expenditure and firm performance, indicating that IT investments translate into performance gains only after digital transformation crosses a specific threshold. Furthermore, CEO maturity and educational attainment significantly enhance digital transformation’s capacity to resolve the productivity paradox by strengthening strategic vision. This research advances the IT productivity paradox literature by (1) uncovering nonlinear moderation dynamics in a developing economy context, and (2) incorporating executive leadership dimensions into digital transformation analysis. Practically, it provides evidence-based guidance on transformation thresholds and leadership selection for Industry 4.0 adaptation.