Digital technology adoption and firm productivity: Insights from logistics service providers

Over the past ten years, digital technology has significantly reshaped production processes and operational frameworks of businesses. Our study explores the relationship between digital technology adoption and total factor productivity (TFP), using a micro-level dataset of 10,983 logistics service providers across 63 cities and provinces in Vietnam, collected 2021. For TFP estimation, we employ the Cobb-Douglas production function and apply both robust standard errors and weighted least squares regressions, addressing heteroskedasticity. The results indicate that digital technologies, including “internet”, “website (portal)”, “software” and “automation system (automatic control)” positively and significantly impact on TFP. Among them, “website” and “automation system” prove to be the most impactful digital technologies. Notably, the relationship between digital transformation and TFP exhibits a U-shaped curve pattern, implying that investment in digital technology might reduce TFP initially before its benefits become evident. These findings provide valuable policy insights to enhance productivity and promote sustainability within the logistics sector.