Does Digitization Promote Green Innovation? Evidence from China

Abstract

Green innovation is an important strategy in seeking sustainable competitive advantages. This paper investigates the impact of enterprise digitization on green innovation and its mechanisms. We find that enterprise digital transformation has a significant effect on the promotion of green innovation. This positive effect mainly stems from the advantage of resource reallocation generated by enterprise digitalization that can alleviate financing constraints and raise risk-taking levels. Furthermore, the level of economic development strengthens the impact of enterprise digitization on green innovation, and the positive relationship between enterprise digitization and green innovation is stronger in regions with stronger environmental regulation and higher intellectual property protection, as well as in state-owned and heavily polluting enterprises. Digitization can optimize resource utilization, strengthen the capacity of green innovation in pollution reduction and promote the clean production of enterprises. Our results show that enterprise digitization plays a positive role in innovation activities. Furthermore, our results show that enterprise digitization plays a positive role in innovation activities.

Micro-perspective of listed companies in China: Digital development promotes the green transformation of the manufacturing industry

“…(1) Python text analysis method [ 37 ]. Dig in this paper are based on the collaboration of three steps: digitized vocabulary construction, text analysis of listed companies’ annual reports, and digitization index measurement.The first step is digitization and word set construction.…”

“…(2) In the robustness test, this paper measures Dig based on digitization-related intangible assets as a replacement variable [ 37 ]. First, this paper collects detailed data on the intangible assets of Chinese A-share-listed manufacturing companies.…”

“…Enterprises tend to reduce or even not disclose relevant information in order to protect their green innovations and enhance market competitiveness, which further enhances the information asymmetry problem [ 55 ]. While Dig helps to strengthen the docking efficiency between enterprises and investors and transmit enterprise-related information outward at low cost, which effectively alleviates the information asymmetry problem with investors and improves the speed and efficiency of financing [ 37 ], Therefore, we introduce financing constraint to explore the channel mechanism of Dig to promote Gtf by mitigating Fin as proposed in Hypothesis 3.…”

“…According to signaling theory, Dig is a positive signal sent outward by enterprises, indicating that they have good development strength and potential when they are more competitive in the financing market. At the same time, enterprise managers can not only use digital technology to obtain enterprise information efficiently but also transmit information outward at low cost on the digital platform, effectively alleviating the problem of internal and external information asymmetry [ 37 ]. According to the long-tail effect, a large number of small customer groups are unable to obtain adequate financing in financial markets, and Dig can improve communication between tail manufacturing enterprises and investors.…”

How green and digital transformation shapes industries

“…Besides known management consulting firms dealing with the subject (Deloitte, 2019;EY, 2020;PwC, 2022), a decent number of researchers are assessing the digital sustainability phenomenon in different aspects. Wang et al (2023) found a positive relationship between enterprise digitalization and green innovation, while Li et al (2023) concluded that digital financial inclusion positively correlates to green innovations. Berger et al (2021).…”