How does Digital Transformation Affect Business Performance —— from the Perspective of Enterprises’ Total Factor Productivity and the Case of Wolong

In recent years, with the application of a series of digital technologies including big data and cloud computing, digital transformation has become a key engine for traditional industries to understand market demand, optimize business processes, improve operational efficiency, and achieve high-quality development. However, in reality, Chinese enterprises still face many problems in the process of implementing digital transformation, generally falling into the dilemma of "not being able to transform, not daring to transform, and unable to transform". Moreover, not all enterprises can achieve the expected results after implementing digital transformation. For the business community, these challenges are a matter of life and death ; For the theoretical community, it highlights significant theoretical gaps and urgent research needs, requiring more targeted answers. Firstly, the conflict between theory and practice. Most literature focuses on the positive economic effects and benefits of digital transformation, with insufficient attention paid to the painful period of high investment in the early stages of digital transformation and the potential negative impacts of this stage. Secondly, measuring the digital transformation of enterprises is a challenge owing to the lack of relevant statistical data. Thirdly, the mechanism of how digital transformation affects enterprise performance needs to be further enriched and deeply explored. On the basis of analyzing the aforementioned research gaps, this article first sorts out and analyzes relevant research on digital transformation, enterprise total factor productivity, etc., focusing on exploring the impact and mechanism of digital transformation on enterprise total factor productivity; Then, through quantitative empirical testing methods, the effects and specific mechanisms of digital transformation on total factor productivity of enterprises were explored. The conclusion of empirical testing shows that digital transformation of enterprises can significantly improve their total factor productivity, and the enhancement of innovation capability and optimization of resource allocation capability are the two mechanisms of this effect. After a series of robustness and endogeneity tests, the conclusion of heterogeneity analysis indicates that the effect of digital transformation on total factor productivity is more pronounced in non-state-owned enterprises and growth stage enterprises. On the basis of empirical research, this article further conducted a case study on the leading enterprise in the motor industry, Wolong Electric Group Co., Ltd., to explore the current situation, problems, specific measures, and implementation effects of the enterprise's digital transformation. The case analysis in this article shows that due to the huge costs and risks in the early stage of digital transformation, Chinese enterprises generally lack awareness of digital transformation, have incomplete digital infrastructure, and urgently need to strengthen their digital talent reserves. Wolong has successfully achieved comprehensive digital transformation of the enterprise and significantly improved various business achievements through step-by-step promotion, strengthening the integration of new and old frameworks, and continuous tracking and evaluation of effects in the process of digital transformation. Finally, based on the above conclusions, this article proposes countermeasures and suggestions for enterprises’ digital transformation from the perspectives of both enterprises and governments.