As the digital landscape evolves rapidly, digital transformation has emerged as a crucial driver for economic growth and innovation, particularly within the manufacturing sector. This transformation, rooted in technologies such as big data, blockchain, cloud computing, and artificial intelligence, has reshaped the production and service capabilities of manufacturing companies. A recent study by Dr. Xiangpeng Meng and Dr. Xinshu Gong from Shihezi University, published in the journal PLOS ONE, focuses on the impact of digital transformation on the innovation output of manufacturing companies, emphasizing the role of internal and external transaction costs.

Dr. Meng and Dr. Gong analyzed data from manufacturing companies listed on the Shanghai and Shenzhen stock exchanges from 2012 to 2022. Their study revealed that digital transformation significantly enhances both the quality and quantity of innovation output. The research highlights that digital transformation reduces transaction costs within companies and improves external transaction efficiency, thereby promoting innovation. “Digital transformation promotes overall improvement in innovation output of manufacturing companies,” said Dr. Xiangpeng. 

The research demonstrated that digital transformation reduces internal transaction costs, such as sales, financial, and management costs. These reductions allow companies to allocate more resources to research and development, thus enhancing innovation performance. By optimizing traditional processes and leveraging digital technologies, companies can improve operational efficiency and reduce costs associated with innovation. For instance, the study found that lower internal transaction costs were a significant driver for improved innovation performance, enabling companies to support more extensive and higher-quality R&D activities.

Externally, digital transformation aids in reducing costs related to acquiring innovation knowledge and resources. It facilitates the search and recombination of innovative knowledge, thereby enhancing the innovation vitality of companies. The digital era requires not only internal resources but also collaborative efforts and value exchange along the industry chain. The study found that digital transformation reduces the dispersion of innovation networks caused by geographical distances and financial constraints, promoting innovation performance by enhancing external transaction efficiency.

One of the most crucial findings is the nonlinear relationship between digital transformation and innovation output under different market conditions. The study’s mediation analysis reveals that the influence of digital transformation on innovation output can be attributed to the reduction of internal transaction costs and the enhancement of external transaction efficiency. This dynamic is further influenced by market competitiveness and market freedom, with digital transformation having a varying impact depending on these factors. In more competitive and free market environments, the benefits of digital transformation on innovation output are more pronounced.

The study emphasizes the need for coordinated development of digital infrastructure at both macro and micro levels to reduce transaction costs and foster innovation. Policy recommendations include promoting the development of digital infrastructure and ensuring a conducive market environment to maximize the benefits of digital transformation. As digital technologies continue to evolve, their integration into manufacturing processes will be vital for sustaining economic growth and driving innovation.

In conclusion, the research by Dr.  Meng and Dr. Gong underscores the significant role of digital transformation in enhancing the innovation output of manufacturing companies. By reducing both internal and external transaction costs, digital transformation fosters a more efficient and innovative manufacturing sector, crucial for economic development in the digital age.

Journal Reference

Meng, Xiangpeng, and Xinshu Gong. “Digital transformation and innovation output of manufacturing companies—An analysis of the mediating role of internal and external transaction costs.” PLOS ONE, 2024. DOI:

About The Author

Dr. Meng Xiangpeng is a research-oriented scholar with a interdisciplinary background. He holds a bachelor’s degree in engineering and is currently engaged in economic research at Shihezi University. His research interests are diverse, and he has an outstanding paper in the interdisciplinary field of econophysics, which is currently in publication. The brief information about this paper is as follows: Cite as: Xiangpeng Meng. The Physics Principles and Mathematical Explanation of Supply and Demand — Returning to the Starting Point of Economic Research. Authorea. July 25, 2023. DOI: