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Original Research

DYNAMIC RELATIONSHIP OF DIGITAL TRANSFORMATION, HUMAN CAPITAL, INNOVATION, AND FINANCIAL PERFORMANCE IN CHINESE MANUFACTURING FIRMS

ZHU YIMING 1, LEO D. MANANSALA 2, EDWIN B. VALEROSO 3, and QINGZE YU 4.

Vol 19, No 05 ( 2024 )   |  DOI: 10.5281/zenodo.11384408   |   Author Affiliation: Graduate Studies in Business, College Business Administration and Accountancy, De La Salle University- Dasmarinas, Dasmarinas City, Cavite 4115 Philippines, Guangdong University of Science and Technology, Guangdong, China 1; Graduate Studies in Business, College Business Administration and Accountancy, De La Salle University- Dasmarinas, Dasmarinas City, Cavite 4115 Philippines 2,3; Guangdong University of Science and Technology, Guangdong, China 4.   |   Licensing: CC 4.0   |   Pg no: 484-505   |   Published on: 29-05-2024

Abstract

Chinese enterprises are increasingly turning to digitalization to tackle the complexities of modern challenges. In the face of external disruptions, the adoption of digital technology has become indispensable for firms across various sectors. This study delves into the specific impact of digital transformation on the financial performance of automobile manufacturing companies, aiming to provide detailed insights into how digitalization affects individual businesses, particularly in terms of human capital and innovation performance. Through the utilization of novel variables and analytical methods, this research addresses existing ambiguities in the literature surrounding the relationship between digital transformation and financial performance. By analyzing an imbalanced panel dataset spanning from 2016 to 2022 and covering 865 instances from 132 A-share automobile manufacturing firms, the study employs a two-way fixed-effects model to scrutinize the data. Additionally, it explores the mediating role of human capital and the moderating effect of innovation performance using stepwise regression and the Bootstrap Test. The findings of the study indicate a positive influence of digital transformation on financial performance in automobile manufacturing companies. Furthermore, it reveals that human capital serves as an indirect mediator between digital transformation and financial performance, with investment in technician training shown to mitigate the effects of digitalization. However, the study does not find a statistically significant relationship between innovation performance and the nexus between digital transformation and financial performance in the automotive manufacturing sector. The practical implications of the study are significant, urging automotive managers to seize digitization opportunities, harness technology for improved efficiency, manage debt prudently, prioritize digital literacy within manufacturing firms, and accelerate efforts to embrace digitization to adapt to the rapidly evolving business landscape. This research contributes timely insights and actionable recommendations for navigating the evolving terrain of digital transformation within the Chinese automotive industry. By shedding light on the specific impacts of digitalization on financial performance and offering practical guidance for industry practitioners, the study enriches the understanding of digital transformation dynamics and its implications for business success in the contemporary context.


Keywords

Digital Transformation, Firm Performance, Text Analysis, Panel Data, Fixed Effects Regression.