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Firm digital investments and capacity utilisation: A perspective of factor inputs

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  • Chen, Aizhen
  • Zhao, Dongyan
  • He, Chengying

Abstract

Data resources empower traditional inputs and promote capacity utilisation. Previous research has proven the positive role of digitisation on capacity utilisation from the perspectives of information asymmetry and technological innovation, but there is still a lack of theoretical foundation. This study proposes a model of the impact of information and communications technology capital on capacity utilisation. We empirically test the relationship between firms' digital investments and capacity utilisation using the data of Chinese manufacturing-listed companies from 2007 to 2021. First, an inverted U-shaped feature exists between firm digital investments and capacity utilisation, and the main mechanisms are the ‘cost effect’, ‘capital allocation effect’ and ‘labour input effect’. Second, firms' bargaining power, industrial technology density and regional market development influence capacity utilisation when firms engage in digital investments. Third, narrowing the digital gaps within industries and regions and increasing investments in artificial intelligence, big data and digital technology applications can enhance the non-linear impact of firm digitisation on capacity utilisation. Fourth, digital transformation can resist the negative impact of external shocks on capacity utilisation to some extent. Our research provides theoretical and practical support to facilitate the high-quality development of firms.

Suggested Citation

  • Chen, Aizhen & Zhao, Dongyan & He, Chengying, 2024. "Firm digital investments and capacity utilisation: A perspective of factor inputs," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    • Handle: RePEc:eee:tefoso:v:200:y:2024:i:c:s0040162523008673
    DOI: 10.1016/j.techfore.2023.123182
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