Digital Transformation and Profit Growth: A Configurational Analysis of Regional Dynamics

Abstract

In this article, we adopt configuration theory to explore how diverse combinations of regional factors contribute to profitability, emphasizing the principle of equifinality, which posits that multiple, equally effective configurations can lead to similar outcomes. This study examines the interplay of multiple factors—enterprise informatization, digital infrastructure, e-commerce, technological investment, innovation, hardware, and software—across four key themes: digital readiness and technological integration, market and economic enablers, innovation capacity and activity, and foundational artifacts and resources. Using data from 31 provinces in China from 2015 to 2022, this study employs fuzzy-set qualitative comparative analysis to uncover pathways to regional profit growth. The study identifies five distinct configurations contributing to profit growth across China's provinces. In most configurations, e-commerce and technological investment emerge as central drivers. However, in less developed regions, profit growth relies more on improvements in digital infrastructure and hardware, with innovation and enterprise informatization playing a less significant role. The findings also reveal that profit growth requires addressing the weakest elements in the ecosystem—whether digital infrastructure, technological capabilities, or other factors. Strategies tailored to regional conditions must prioritize improving these weaker components to achieve sustained growth, as ignoring them can limit the overall success.