The rise of digital firms has reshaped global economic structures, yet their productivity and competitive advantages remain debated. Conventional assumptions suggest digital firms are inherently more productive, but empirical evidence presents a nuanced picture. A key challenge in assessing their impact lies in the absence of a stable definition, leading to inconsistencies in classification and measurement. This study examines the productivity of digital firms using a dataset of 100,000 firms across OECD countries from 2008 to 2019. Total factor productivity (TFP) is estimated using the Levinsohn and Petrin (2003) and Wooldridge (2009) methods, addressing input endogeneity.
Our findings reveal that digital service firms exhibit significantly higher TFP than non-digital firms, while digital manufacturing firms do not display similar advantages. Scalability emerges as a key firm-specific advantage, enabling digital service firms to expand output without proportional cost increases. However, balance intangible assets do not consistently correlate with productivity gains; rather, R&D investment, employee training, and internally developed software drive firm performance. Additionally, digital service firms tend to cluster in metropolitan areas due to access to skilled labour, whereas digital manufacturers do not exhibit strong geographic clustering.
This study contributes to the literature by identifying scalability as a critical ownership advantage and challenging the assumption that all intangible assets enhance productivity. The findings have significant implications for policy, urban planning, and business strategy. Future research should explore how emerging technologies, such as AI and blockchain, further shape digital firm competitiveness.