Beyond the Modern Productivity Paradox : The Effect of Robotics Technology on Firm Productivity in China

Is the productivity effect of robotics technology another example of the modern productivity paradox? This study adds to the debate on this question by providing firm-level evidence from China and exploring the underlying mechanisms. Focusing on a recent period from 2013 to 2017, we find that city-level robot exposure plays a significant role in enhancing productivity for Chinese firms in industries with high degrees of task replaceability. The results of the mechanism analysis further show that high exposure to robotics technology incentivizes these firms to improve innovation performance and develop human capital. Investigating the heterogeneity of the effect of robot exposure, we also find that the positive productivity effect is more significant in cities with higher absorptive capacity, industries with lower degrees of competition, and firms with stronger political connections. On the contrary, there is evidence that for firms with low task replaceability, robot exposure reduces their productivity probably due to the effect of resource reallocation