Digital transformation, eco-innovation and total factor productivity in Spanish manufacturing firms

Digital transformation and sustainability-oriented practices are reshaping the competitive dynamics of manufacturing firms, yet their joint implications for productivity remain insufficiently understood. This study examines how digital transformation, eco‑innovation and social sustainability relate to Total Factor Productivity (TFP) using firm‑level data from the 2022 wave of the Encuesta sobre Estrategias Empresariales (ESEE) for Spanish manufacturing firms. Digital transformation is measured through a multidimensional index capturing technological assets, digital human capital and engagement with digital processes. Eco‑innovation and social sustainability are operationalized through firms’ implementation of environmental practices and socially oriented innovation activities. TFP is estimated from a Cobb–Douglas production function and modeled using ordinary least squares. The results show that eco‑innovation and digital transformation are consistently and positively associated with higher TFP, while the relationship between social innovation and productivity is positive but less robust. The interaction between eco‑innovation and social innovation is positive yet statistically insignificant, suggesting limited complementarity between both dimensions. Additional analyses indicate that some environmental investments may involve short‑term adjustment costs before translating into productivity gains. This study contributes by providing novel firm‑level evidence from Spanish manufacturing, integrating digital transformation, eco‑innovation and social sustainability within a unified analytical framework. The findings highlight the managerial relevance of combining digital capabilities with environmental practices to enhance productivity, while underscoring the need for further research on the productivity effects of social sustainability initiatives.