Digital technology, the industrial internet, and cost stickiness

The deep integration of digital technology with the real economy has reconstructed production systems. We explore the impact of digital technology on the resource allocation behavior and efficiency of manufacturing enterprises. Using a sample of Chinese A-share listed manufacturing firms over the 2010-2021 period, we find that digital technology alleviates cost stickiness, especially in enterprises with a high level of Industrial Internet platform usage. This effect occurs by optimizing the labor force structure and improving the economic benefits of labor capital investment. Heterogeneity analysis shows that this effect is pronounced in enterprises with high levels of labor intensity and business complexity. Our findings shed new light on the consequences and mechanism of enterprise cost optimization that is driven by technology-driven reforms.