Firm-level digital technology and Total Factor Productivity in a developing country: Evidence from panel data in Vietnam

Abstract

In the era of the digital economy, the relationship between digital transformation and total factor productivity at the firm level has incalculable repercussions for businesses seeking to sustain high-quality growth. In addition, it is crucial to increase the total factor productivity of a company because it contributes to the accomplishment of sustainable development. Consequently, this paper investigates the effects of firm-level digital technology on Total Factor Productivity (TFP) levels using Vietnamese small and medium-sized enterprises (SMEs) data from 2015 to 2019. Using an analytical framework, the research tests the learning-by-doing hypothesis. The study categorizes Firm-level digital technology as follows: (1) Computer-operated devices, (2) Personal computers without Internet access, and (3) Personal computers with Internet access.  After controlling for probable endogeneity, our empirical findings demonstrate that digital technology positively affects firm productivity. However, the digital technology productivity premium varies across businesses.