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This paper aims to explore the underlying mechanisms and boundary conditions through which equipment manufacturing enterprises can capture market value from digital transformation, with a specific focus on the roles of knowledge search and knowledge recombination.

This study uses a double fixed-effects model to test the hypotheses, using a unique data set of “firm-year” observations from 739 publicly listed equipment manufacturing companies in China, spanning the period from 2018 to 2022.

Digital transformation drives market value creation in equipment manufacturing enterprises through both breakthrough knowledge recombination (BKR) and progressive knowledge recombination (PKR). In addition, the analysis of marginal conditions reveals that diversified knowledge search serves as a substitute for digital transformation in promoting BKR, while also positively moderating the relationship between digital transformation and PKR.

Grounded in the knowledge-based view theoretical framework, this study introduces the novel concepts of BKR and PKR and systematically examines how digital transformation impacts market value in equipment manufacturing enterprises.