Firm Total Factor Productivity Research Articles

Does e‐commerce infrastructure increase enterprise productivity? Evidence from China's e‐commerce demonstration city

AbstractThis study leverages the National E‐commerce Demonstration City Pilot (NEDC) as a quasi‐natural experiment in e‐commerce infrastructure development. Utilising panel data from non‐financial firms listed on China's A‐share market from 2005 to 2022, we pioneered employ a multi‐period difference‐in‐differences (DID) approach to explore the direct and indirect effects of e‐commerce infrastructure on total factor productivity (TFP). Our findings reveal that: (1) The NEDC initiative significantly enhances firm‐level TFP. This result remains robust after addressing endogeneity issues through IV‐2SLS and propensity score matching and difference in differences methods and undergoing a series of robustness tests. (2) Channels tests indicate that the NEDC policy indirectly boosts firm TFP primarily by fostering technological innovation and augmenting human capital. (3) Heterogeneity analysis demonstrates that the NEDC policy effectively stimulates TFP growth in state‐owned enterprises, firms with high equity concentration, manufacturing and low‐tech industry firms. The policy's impact is more pronounced in cities with high administrative levels, in the eastern and central cities, and in cities with superior traditional infrastructure. The empirical evidence provided by this study not only supports the role of e‐commerce infrastructure in driving economic growth but also offers valuable insights for bridging the income disparity between developing and developed nations, and mitigating income inequality.

Government Subsidies, Green Innovation, and Firm Total Factor Productivity of Listed Artificial Intelligence Firms in China

Government Subsidies, Green Innovation, and Firm Total Factor Productivity of Listed Artificial Intelligence Firms in China

The role of venture capital in determining the total factor productivity of renewable energy enterprises: In the context of government subsidy reduction

Studies examining the correlation between venture capital (VC) and total factor productivity (TFP) have yielded inconsistent conclusions. In the context of government subsidy (GS) reduction, VC is gradually becoming a crucial external financing channel for renewable energy (RE) enterprises. Nevertheless, there is a scarcity of research concerning the influence of VC on the TFP of RE firms, and the impact of GS on their relationship is also insufficiently considered. Therefore, employing two-way fixed-effects and threshold effects models, this research investigates the impact of VC on TFP in 114 Chinese RE enterprises from 2011 to 2021 and analyzes the role of GS in shaping this association. The conclusions are outlined as follows: (1) Overall, VC notably boosts the TFP of RE firms. (2) VC can indirectly improve TFP by fostering R&D investments and mitigating financing constraints. (3) A single threshold effect is identified in the correlation between VC and TFP based on GS. Significant positive effects of VC on TFP are observed only when GS is below 1.07%. This implies that, in the context of GS reduction, the beneficial effect of VC on the TFP of RE firms is gradually becoming evident. Based on this, we propose targeted policy suggestions.

Unveiling the affecting mechanism of digital transformation on total factor productivity of Chinese firms.

The importance of digital transformation (DGT) for increasing productivity cannot be negated and Chinese firms are rapidly embracing the digital transformation for their sustainability. But the mechanism and impact of digital transformation on total factor productivity (TFP) of firms is still unclear and this study is intended to fill this gap using the data of 3112 listed firms of China during 2011 to 2022. We applied various econometric techniques like stepwise regression analysis, instrumental variable approach, differences in difference approach, and mediating analysis to determine the relationship between digital transformation and TFP and robustness of estimated findings. The findings indicate that DGT has a positive impact on overall TFP of firms in China while operating efficiency, cheaper costs, and a stronger capacity for innovation mediates this relationship. Moreover, it is explored that conventional information and communication technologies have not significant impact on TFP of firms. The findings of the study remain valid even applying many robustness checks and attempts to control the issue of endogeneity. To fully leverage the potential benefits of digital transformation on TFP, it is essential to focus on enhancing digital literacy and skills among the workforce. Governments and relevant stakeholders should prioritize and invest in comprehensive digital literacy and skills training programs to empower the workforce with the knowledge and expertise needed to navigate the digital age effectively.

A Non‐parametric Estimation of Productivity with Idiosyncratic and Aggregate Shocks: The Role of Research and Development (R&D) and Corporate Tax

We develop a non‐parametric technique framework for estimating firm‐level Total Factor Productivity (TFP). Our paper has two major novelties: first, we propose a modelling of productivity with both firm‐idiosyncratic factors and aggregate shocks. Second, we apply the Bayesian Markov Chain Monte Carlo (MCMC) technique that offers a numerical integration of productivity outside the posterior overcoming the restrictive assumptions about the relationship between productivity and variable production inputs. We implement our methodology in a group of 4,286 manufacturing firms from France, Germany, Italy, and the UK (2001–14). The results show that: (i) aggregate shocks matter for firm TFP evolution. The global financial crisis of 2008 caused severe, albeit short, adverse effects on TFP; (ii) there is substantial heterogeneity across countries in the way firms react to changes in R&D and taxation. German and UK firms are more sensitive to fiscal changes than R&D, while the opposite is true for Italian firms. R&D and taxation effects are symmetrical for French firms; (iii) the UK productivity handicap continues for years after the financial crisis; and (iv) there are substantial knowledge spillovers among German and Italian firms.

The influence of the guidance on building a green financial system on environmentally friendly firms’ total factor productivity in China

With China's proposed green development strategy, environmental protection investment needs are growing exponentially, and government funding alone is inadequate to meet the massive demand. To encourage social investment in green industries and achieve green development goals, the authorities implemented the major green finance policy entitled the Guidance on Building a Green Financial System (GBGFS) in late 2016. Whether this policy effectively promotes the development of environmentally friendly (EF) firms is an essential under investigated question. This study employs a difference-in-differences approach to explore whether and how the GBGFS affects EF firms' total factor productivity (TFP) with a sample from 2012 to 2021. Our benchmark regression and robustness tests demonstrate that the GBGFS effectively promotes EF firms' TFP. We also obtain three notable research findings with a number of additional analyses. (a) Although there is a certain lag, the policy effect was obviously enhanced with the passage of time. (b) Our threshold effect analyses reveal that the enhancing effect of the GBGFS on EF firms' TFP only becomes significant when research and development (R&D) investment, profitability (ROA), and government subsidies (GSF) exceed certain values. Further analysis demonstrates that firms with higher ROA and more GSF can effectively increase R&D. (c) Finally, GBGFS implementation has a greater impact on firm TFP in China's more developed region than its less developed regions. The findings suggest that regulatory authorities should persist in enforcing the GBGFS policy and encourage corporate R&D investment. In addition, the central government should design targeted policies based on the characteristics of different regions to improve the policy effect.

Does Confucian culture reduce firms' pollution emissions

AbstractThis paper explores the influence of Confucian culture on firms' emissions. We measure Confucian culture during the Ming and Qing dynasties using the density of jinshi in that region and test the causal relationship between Confucian culture and firms' emissions using the Annual Survey of Industrial Firms (ASIF) and China's Environmental Statistics Database (CESD) from 1998 to 2013. Our research reveals that regions with a stronger Confucian cultural influence have a significant reduction in pollution emissions from their firms. Further analysis demonstrates that the government in regions with a strong Confucian cultural influence attaches more importance to environmental protection and enforces stricter environmental regulations on firms. Besides, the people demonstrate heightened environmental awareness, incorporating it into economic development, thus reducing firms' pollution emissions. In addition, Confucian culture can reduce pollution emissions by improving the total factor productivity of firms.

The Communist Party of China embeddedness in corporate governance and total factor productivity: Evidence from private firms in China

This research offers a comprehensive exploration into the influence of the Communist Party of China's involvement in corporate governance and its subsequent effect on the total factor productivity of firms. Drawing data from publicly listed firms spanning from 2008 to 2021, we employ a multi-period difference-in-differences analytical approach. Our investigations reveal that the establishment of party organisations within private firms notably enhances their productivity. Empirical evidence consistently underscores the positive role of the Communist Party of China in elevating productivity standards. This outcome is further corroborated through rigorous validation tests.

The impact of green finance policy on total factor productivity: Based on quasi-natural experiment evidence from China

Treating the implementation of green finance policy as a quasi-natural experiment, we explore its effect on the total factor productivity of firms, then perform several tests to illustrate the stability of this effect, and then explain this effect based on financing constraint and technological innovation. It has been found that the green finance policy has an inhibitory effect on total factor productivity, which is validated in various tests including the parallel trend test, the heterogeneity treatment effect test, and the robustness test including the placebo test and endogeneity test. The heterogeneity analysis shows that different ownership types and industry type of firms have different impacts on this effect. Further extended analysis reveals that the policy leads to the flow of financial resources from polluting firms to non-polluting firms. There is no significant improvement in technological innovation in non-polluting firms, while there is a significant decline in technological innovation in polluting firms due to lack of credit support. Finally, we make several recommendations based on our findings to achieve precise implementation of the green finance policy.

Does geographical decentralisation harm the total factor productivity of firms in China?

ABSTRACT Under dual market and policy forces, industries vacated central business districts in Chinese cities, showing a decentralised layout. Using Chinese industrial firms’ micro-data (2004–12), with township-level division as the unit, we describe urban industrial decentralisation and polycentric layout, exploring their impact on firms’ total factor productivity (TFP). We found that: (1) industrial decentralisation negatively impacted TFP during the early and middle stages of urbanisation; (2) the polycentric layout can alleviate the firms’ TFP losses caused by decentralisation; and (3) industrial decentralisation reduces diversified agglomeration, lowering TFP. The conclusions of this study provide policy recommendations for urban industrial spatial planning.

Digital transformation and firms' total factor productivity: The role of internal control quality

This paper examines the effects of digital transformation on firms' total factor productivity (TFP) and its underlying mechanisms using panel data from Chinese A-share listed companies between 2013 and 2021. By employing panel regression and mediation effect models, our findings demonstrate that digital transformation significantly enhances a firm's TFP. Furthermore, we reveal that digital transformation fosters TFP growth by enhancing the quality of internal control. This article offers novel insights into the mechanistic pathways through which digital transformation influences firm productivity.

R&D Deduction Intensity, Entrepreneurship and Total Factor Productivity of Firms

This paper selects A-share listed manufacturing companies from 2016 to 2022 for analysis, and uses the data to investigate the interrelationships among three dimensions: the strength of R&D add-on deduction, entrepreneurship, and total factor productivity of firms. The aim is to explain the policy implementation effects of China's R&D add-on deduction policy since the 1990s. This paper examines the significant effect of the strength of the add-on deduction policy on enhancing the total factor productivity of firms and the positive moderating role of entrepreneurship in the impact of the strength of R&D add-on deduction on the total factor productivity of firms. The purpose of this paper is to provide a realistic basis for the national policy of optimizing R&D cost-added deduction to promote high-quality development of China's listed manufacturing industry.

Do local governments' energy-saving target constraints inhibit financialization? Evidence from nonfinancial listed firms in China.

The negative impact of the financialization of non-financial firms cannot be ignored in China. However, existing studies neglect that the government environmental governance is an important influential factor in corporate investment decisions. Using a sample of China's non-financial listed firms from 2007 to 2020, we examine the impact of local governments' energy-saving target constraints on the financialization of local firms in terms of whether local governments set numerically specific energy-saving targets in the Government Work Reports. The main findings of this paper are as follows. First, local governments setting clear energy-saving targets inhibit local firms' financialization and the result holds even after a series of robustness tests. Second, the negative association between local governments' energy-saving target constraints and firm financialization is more pronounced among firms in eastern regions and green provinces. Third, the quality of firm information disclosure and local environmental public supervision enhance the inhibiting effect of local governments' energy-saving target constraints on firm financialization. Fourth, local governments' energy-saving target constraints restrain firm financialization by attracting more external analyst coverage and encouraging internal technological innovation. Moreover, this inhibiting effect can help reduce overinvestment and improve the total factor productivity of firms. Our study provides evidence supporting firm financialization studies from the novel perspective of government environmental governance.

Does manufacturing servitization reduce emissions intensity? evidence from China

ABSTRACT This paper investigates the impact on polluting emissions as a result of manufacturing industries in China offering services as well as products. We merge detailed firm-level statistics covering 2000 to 2011, and use two-way linear fixed effects regression to control for firm and year heterogeneities and a host of control variables. The empirical results show that manufacturing servitization significantly reduces the emission intensity of firms. This effect is achieved by improving the total factor productivity of firms, optimizing the efficiency of energy use, and increasing the share of the highly-skilled labour force. Moreover, the emission reduction effect of manufacturing servitization is more profound in the eastern and central regions, pollution-intensive industries, non-state-owned firms, and processing trade firms. In addition, our extended analysis shows that the emission reduction effects of manufacturing servitization can be strengthened through trade liberalization and cohort study. The major policy implication is that governments should undertake industrial policies that reinforce the positive effects of manufacturing servitization in order to achieve win-win outcomes in manufacturing upgrading and environmental protection.

Can government digitalization promote firm productivity? Evidence from Chinese listed firms

ABSTRACT In the digital era of governance, few studies have analysed the influence of digital government on micro economies. To fill this gap, we explore the nexus between digital government and firm total factor productivity (TFP), and uncover the potential transmission channels behind this connection by focusing on Chinese listed firms from 2010 to 2017 and utilizing panel regression with firm-, year-, and province-fixed effects. Our findings confirm that digital government has constructive effects on firm TFP. Furthermore, empirical results suggest that this favourable impact can be transmitted through three channels of firm transaction costs and innovation, digital infrastructure construction, and government-market relationships. Further analysis reveals that the beneficial effect of digital government on firms is more significant in provinces with low fiscal transparency and complex topography, indicating that digital government compensates for the disadvantages of low fiscal transparency and inconvenience of steep terrain. Based on these conclusions, we provide suggestions for government digitalization to improve the performance of government-microeconomic complementation.

The impact of investor sentiment on firms' green total factor productivity-facilitator or inhibitor?

Investor sentiment does not only have negative impacts. It may also improve green total factor productivity by invigorating funds. This research constructs a new indicator at the firm level to measure the green total factor productivity of firms. We research the effect of investor sentiment on firms' green total factor productivity using a sample of Chinese heavy polluters listed on Shanghai and Shenzhen A-shares between 2015 and 2019. Through a series of tests, the mediating role of agency costs and financial situations is confirmed. It is discovered that the digitization of businesses facilitates the effect of investor sentiment on the green total factor productivity of businesses. And when managerial competence reaches a certain threshold, the impact of investor sentiment on green total factor productivity is amplified. Tests for heterogeneity reveal that high investor sentiment has a larger impact on green total factor productivity in firms with superior supervision.

Exploring the impact of the level of financial technology on the total factor productivity of firms based on heterogeneity analysis

This paper examines how financial technology (fintech) affects the total factor productivity (TFP) of firms using a sample of 370 GEM-listed companies in China from 2015 to 2020. The results indicate that fintech level has increased steadily over this period and has a positive and significant effect on TFP. The paper further investigates the underlying mechanisms and finds that fintech enhances TFP by easing financing constraints and lowering agency costs. Moreover, the paper conducts heterogeneity analysis and reveals that fintech has a larger impact on TFP for firms located in less developed regions and for private-owned firms. The paper concludes with some policy implications for leveraging fintech to improve financial inclusion and facilitate high-quality economic development in China.

The impact of digital transformation on the total factor productivity of heavily polluting enterprises

In the digital economy, the relationship between digital transformation and a company's total factor productivity has profound implications for high-quality business development. Heavy polluters are given more environmental responsibility because of their high pollution and emission characteristics. This paper analyses the theoretical framework for the impact of digital transformation on the total factor productivity of heavily polluting firms. Using a sample of Shanghai and Shenzhen A-share heavy polluters from 2010 to 2020, we explore how the digital transformation of heavy polluters affects the total factor productivity of firms. The study found that the digital transformation of heavily polluting companies can effectively improve total factor productivity, internally by increasing their level of green technology innovation and externally by increasing their willingness and capacity for corporate social responsibility. At the same time, digital transformation can improve total factor productivity by reducing cost stickiness, revealing the "black box" in which digital transformation affects the total factor productivity of an enterprise. It was further found that the digital transformation of companies with high levels of environmental investment, large enterprises, those in non-manufacturing industries, and heavy polluters of a state-owned nature had a more significant impact on total factor productivity. The findings of the study provide empirical evidence for the digital transformation of heavily polluting companies to improve productivity and the green transformation of the economy for companies under the low carbon goal.

Government cooperation, market integration, and productivity: evidence from China

ABSTRACT This paper examines the causal effect of regional market integration on firm productivity through the use of 2001–2008 firm-level microdata in China. The research design relies on a regression discontinuity design based on China’s Pan-Pearl River Delta (PPRD) regional cooperation policy. The results indicate that the PPRD regional cooperation policy increases the total factor productivity (TFP) of firms by 6% on average. The positive impact of the PPRD regional cooperation policy on TFP is greater for private firms, large firms, and labour-intensive firms. Exploring the mechanism through which regional cooperation increases firm TFP, we find that the PPRD regional cooperation policy improves firms’ productivity primarily by expanding the scale of firms, promoting technological innovation, and optimizing the allocation of factors. The study findings deepen our understanding of productivity improvement from the perspective of the market environment.

The Impact of Place-Based Policies on Firm Performance: Evidence from China

This study investigates the causal effect of the first round of China’s Great Western Development Strategy (GWDS) on the total factor productivity (TFP) of Chinese manufacturing firms employing the geographic regression discontinuity design. It uses the firm-level data from China’s Annual Survey of Industrial Firms (ASIF) database from 1998 to 2007. To follow the principle of the geographic regression discontinuity design and ensure the validity of our identification strategies, only firms within a 10 km radius on either side of the GWDS boundary were retained in the baseline regression. The main results include some of the following: (1) The GWDS increased the TFP of firms on the western side of the boundary in the range of 11.2% to 13.7%. (2) The main mechanisms of this improvement were identified as the reduction of a firm’s actual income tax rate and increased firm investment in high-quality human capital. (3) The GWDS has a greater impact on private firms, small firms, and labor-intensive firms. This study provides reliable evidence that place-based policies can promote the sustainable development of firms within the affected regions, and could serve as policy inspiration to alleviate regional development disparities in other developing countries.