Impact of Digital Transformation Technology Adoption on Firm-Level Total Factor Productivity Convergence

Abstract

This study examines how digital transformation technology (DTT) adoption affects the speed of total factor productivity (TFP) convergence using Korean firm-level data from 2017 to 2023. We confirm the presence of TFP convergence in both manufacturing and non-manufacturing sectors. We find that DTT adoption is associated with higher TFP growth in both sectors. However, the speed of convergence slows as DTT intensity increases, and this pattern is more pronounced among manufacturing firms. Overall, we provide additional evidence and new insights into how technological progress is linked to productivity dynamics and convergence patterns across sectors. We also highlight sector-level differences in the relationship between DTT diffusion, TFP growth, and catch-up processes.