Search results

This study aims to investigate the impact of firms’ digital orientation (FDO) on corporate green innovation (CGI) among Chinese firms, examining the effects of financial constraint as the mediator and exploring heterogeneous effects across different firm contexts.

Using a sample of 28,697 firm-year observations from Chinese A-share listed companies (2008–2021), we employ a novel multidimensional measure of FDO derived from textual analysis of corporate annual reports. CGI is quantified using patent-based metrics. We utilize fixed-effects panel data models as benchmark regression to quantify FDO’s impact on CGI. Later, we utilize two-stage least squares, alternate measure for core explanatory variable, alternate as well as lead measures for explained variable and propensity score matching to tackle concerns for potential endogeneity.

Our results unveil a substantial positive connection between FDO and CGI. This connection is facilitated through the alleviation of financial constraints. Furthermore, heterogeneity analysis shows that the impact of FDO on CGI is more pronounced for state-owned enterprises, firms in areas with lower financial technology development and politically connected firms.

Our findings suggest that managers should view FDO as a strategic posture that can drive sustainable innovation, not just as a technological imperative. Policymakers should consider the role of FDO when designing policies to promote CGI, particularly in less-developed regions.

This study extends current understanding by: (1) Employing a comprehensive multidimensional measure of FDO that goes beyond the existing technologically focused digital transformation matrices. (2) Identifying financial constraints as a key mediating mechanism in the FDO–CGI relationship. (3) Revealing heterogeneous effects across different firm contexts, providing nuanced insights into how institutional and environmental factors moderate this relationship.