Abstract: Taking A share listed companies in China from 2011 to 2022 as a sample, this paper subdivides enterprise digitization into two levels: underlying digital technology use and digital technology application, then constructs a digitization level index by using textual analysis to empirically investigate the differential impact of enterprise digitization on total factor productivity, and finally tests the mediating and moderating roles of dynamic capabilities in the process. The results show that both levels of digital progress contribute to the improvement of total factor productivity, but the promotion effect of underlying digital technology application is greater. Dynamic capabilities play a partial mediating and moderating role between the digital progress of enterprises and total factor productivity. The mediating role of dynamic capabilities is mainly achieved through absorptive capacity and innovation capacity, with absorptive capacity having the greatest moderating effect. The conclusion still holds true after multiple robustness tests. Further analysis reveals that for non-state-owned enterprises, the higher environmental uncertainty they are exposed to and the higher professional quality their employees have, the better able digital progress is to improve total factor productivity. The research conclusion enriches the mechanism of how digitalization influences the total factor productivity of enterprises and reveals the “dual role” of dynamic capabilities between digitalization and total factor productivity.

Key words: enterprise digitalization, underlying digital technology use, digital technology application, total factor productivity, dynamic capability