The Impact of Digital Transformation on Labor Productivity of Chinese Small and Medium-Sized Enterprises (SMEs)

As an important driving force and trend in world economic development, digital transformation is reshaping operations and competitiveness of enterprises globally. However, empirical evidence regarding its impact on labor productivity remains limited, especially for small and medium-sized enterprises (SMEs). The study aims to examine the impact of digital transformation on labor productivity of Chinese SMEs. By using panel data on 7762 Chinese SMEs from The 14th Survey of Private Enterprises in China conducted by ACFIC in 2020, the study presents a quantitative analysis of the direct and indirect impact of digitization level on labor productivity. The results revealed an initial negative impact of digitization followed by positive returns after reaching the threshold, demonstrating an overall U-shaped relationship between them. Technological progress, organizational change, and labor mobility are key impact mechanisms linking digital transformation and labor productivity. Moreover, the impact varied across regions and industries due to differences in contextual factors. Furthermore, the study also offers practical implications for Chinese SMEs to enhance labor productivity through digital transformation, such as aligning technical and social subsystems to maximize synergy, refreshing employee skills, and embracing labor mobility, developing digital strategies tailored to their industries and regions, etc.