Releasing the technological backlog: The role of digital transformation

Abstract

Latecomer firms often face persistent disadvantages relative to frontier firms, giving rise to a neglected but critical phenomenon we term technological backlog—the accumulated potential for catch-up created by long-term lag. Prior research largely overlooks how this backlog can be released and transformed into productivity growth, especially in the digital era. This study addresses this gap by examining whether, how, and under what conditions digital transformation enables latecomers to release their technological backlog. Using panel data on Chinese listed manufacturing firms (2004–2022), we find that digital transformation does not directly promote productivity growth; rather, it functions as a contingent catalyst that unlocks technological backlog and indirectly enhances productivity. The mechanism operates through strengthened absorptive capacity, with intangible assets serving as a vital complement. Heterogeneity analyses further reveal that the effect is stronger for state-owned, older, and larger firms, as well as those in high-tech, digitally advanced, and technology-intensive industries. By introducing technological backlog as a new lens for catch-up theory and reframing digital transformation as a conditional catalyst rather than a universal driver, this study advances theoretical debates on catch-up and digital transformation while offering practical guidance for managers and policymakers on designing effective digital catch-up strategies.