Digital transformation or not? Manufacturer's selection strategy under carbon cap-and-trade mechanism

Abstract

Purpose The digital economy is profoundly transforming the manufacturing industry's fundamental concepts and value creation logic, making digital transformation (DT) strategy a crucial decision for manufacturers. And faced with increasingly severe environmental issues, DT may become an important means to achieve sustainable development. This paper mainly discusses the strategic choice of the manufacturer's DT and analyzes the impact of DT on carbon emissions.Design/methodology/approach Based on the carbon cap-and-trade mechanism, the authors have constructed two decision models to study the DT strategy of the manufacturer, further exploring the impact of the mechanism on the DT strategy and production strategy of the manufacturer. Finally, the authors discussed the effect of manufacturers' DT on their carbon emissions.Findings The authors found that the manufacturer should initiate DT to enhance their competitiveness, regardless of whether they are in a low digital technology scenario or a high digital technology scenario. Notably, DT can enhance the ability of the manufacturer to respond to external emergencies. In a low digital technology market scenario, both carbon emissions per unit of product and carbon price are positively affecting the digitization level of the manufacturer. In a high digital technology market scenario, the manufacturer will initiate a full degree of DT. Moreover, the impact of DT on total carbon emissions varies in markets with different levels of digital technology.Originality/value Innovatively, the authors divided the DT of the manufacturer into market scenarios with low digital technology and high digital technology. Provide the manufacturer with DT decisions according to different scenarios. At the same time, it verifies the uncertainty of DT on carbon emission and enriches the related research.

The impact of digital transformation on firm performance

“…In this process, DT empowers corporate innovation, improving the efficiency of corporate production and operation, and achieving optimization in all aspects of production, the supply chain, and sales, which will ultimately have a profound impact on corporate performance. Chen et al. (2024) pointed out that, the more advanced the digital technology, the higher the profit the manufacturer will gain from digital technologies.…”

“…In this process, DT empowers corporate innovation, improving the efficiency of corporate production and operation, and achieving optimization in all aspects of production, the supply chain, and sales, which will ultimately have a profound impact on corporate performance. Chen et al (2024) pointed out that, the more advanced the digital technology, the higher the profit the manufacturer will gain from digital technologies. Although the development of digitalization has been highly valued by both Chinese Government and firms in practical, there are still many problems and shortcomings in the development and promotion of this transformation.…”

Emission reduction pressure and enterprise digital transformation: do enterprise innovation and digital economy matter?

“…For a long time, there has been controversy about the impact of environmental pressure on enterprise behavioural decisions. Some researches hold that external environmental pressure enhances the quantity and quality of enterprises' innovation (Hu et al, 2020a, b;Chen et al, 2024). Carbon efficiency has a significant positive impact on the total asset turnover and Tobin's Q value (Wang et al, 2021).…”

“…Some researches hold that external environmental pressure enhances the quantity and quality of enterprises’ innovation (Hu et al. , 2020a, b; Chen et al. , 2024).…”