How Does Digital Transformation Affect Corporate Innovation? Evidence from Chinese Listed Corporations

Abstract

Under the impact of the new information technology, digital transformation drives the revolution of corporate production modes. However, whether and how digital transformation enhances corporate innovation requires further empirical research. Based on the data of Chinese A-share listed corporations of 2008-2020, we study the impact of digital transformation on innovation quantity and quality as well as the potential mechanism behind it. Results show that digital transformation effectively improves corporate innovation, supported by a series of robustness tests. Heterogeneity analysis reveals that digital transformation performs better in corporations with male CEOs, CEOs with higher education levels, and lower financial risks. The positive impact of digital transformation is amplified for corporations in high-tech industries and highly informatized regions. Further analysis suggests that alleviating financing constraints and promoting stock liquidity are essential for corporations to progress digitally.

Keywords: digital transformation, Corporate innovation, Financing constraints, Stock liquidity