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Does Digitalisation Promote the Servicification of Manufacturing in China?

Does Digitalisation Promote the Servicification of Manufacturing in China?
7 May 2024
Wenxiao Wang, Shandre Mugan Thangavelu
digitalisation, servicification, manufacturing firms, services, China

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This paper uses detailed firm-level and transactional-level trade data to examine the causal relationship between digitalisation and servicification in Chinese manufacturing firms. Using the novel approach of text mining and analysis, this paper constructs two firm-level measurements of digitalisation and servicification. Further, it explores the impact of digitalisation on services integration within manufacturing activities. We find digitalisation plays a crucial role in enhancing manufacturing servicification, enabling firms to produce and sell more service products. We also highlight that the two mechanisms through which digitalisation promotes servicification are digital technology and profitability. This paper contributes to the existing literature by developing the micro-level evidence of the digital transformation occurring within Chinese manufacturing firms and sheds light on the emerging services-led global value chain upgrading pattern.

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