Can Corporate Digitalization Promote Green Innovation? The Moderating Roles of Internal Control and Institutional Ownership

Abstract

This study examined the impact of corporate digitalization on green innovation using data concerning A-share companies listed on the Shanghai and Shenzhen stock markets from 2012 to 2018. We measured the degree of corporate digitalization through a text analysis of annual reports and empirically tested its impact on green innovation using a panel data fixed effects model. We found that digital transformation can improve green innovation levels, especially when internal control is weak and institutional ownership is low. These findings support the theoretical expectation that digitalization can strengthen supervision. The relationship between digitization and corporate governance mechanisms was proved to be complementary. Additionally, the analysis of economic consequences showed that digitalization improves financial performance by promoting green innovation. The results clarify the determinants of corporate green innovation and provide relevant insights for increasing the value of corporate digital transformation.

Can Digital Transformation Promote Green Technology Innovation?

“…Through empirical research, Wang et al found that the improvement of digitization level will effectively enhance the technology integration ability of enterprises, thus promoting the green technology innovation activities of resource-based enterprises [23]; Song et al, taking heavily polluting enterprises as the sample, found that enterprise digitization mainly promoted enterprise green technology innovation by improving the enterprise information-sharing level and knowledge integration ability [24]. Li and Shen found that digital transformation significantly promoted green innovation, and its promotion effect was more obvious in enterprises with poor quality of internal control and low shareholding of institutional investors [25]. The other holds that digital transformation does not significantly promote green technology innovation.…”

Digital Transformation on Enterprise Green Innovation: Effect and Transmission Mechanism

“…A few scholars have studied the impact of digital technologies on green innovation, but these studies are relatively dispersed, mainly in terms of digitalization, blockchain, Internet, and big data. First, existing studies believe that digital technologies can alleviate the problem of enterprise information asymmetry, improve the level of information sharing [ 53 ], push the integration of R&D resources and knowledge, help to enhance the innovation vitality of enterprises [ 30 ], optimize the allocation of green R&D resources, and, thus, promote green innovation of enterprises [ 76 ]. For instance, Li and Shen (2021) found that digitalization could improve the level of green innovation, especially in the case of imperfect internal control and institutional ownership [ 76 ].…”

“…First, existing studies believe that digital technologies can alleviate the problem of enterprise information asymmetry, improve the level of information sharing [ 53 ], push the integration of R&D resources and knowledge, help to enhance the innovation vitality of enterprises [ 30 ], optimize the allocation of green R&D resources, and, thus, promote green innovation of enterprises [ 76 ]. For instance, Li and Shen (2021) found that digitalization could improve the level of green innovation, especially in the case of imperfect internal control and institutional ownership [ 76 ]. Using the survey data of 215 enterprises, El-Kassar and Singh (2019) found that digitalization positively affected enterprise green innovation activities, thereby affecting enterprises’ competitive advantages [ 77 ].…”

Does the Environmental Regulation Intensity and ESG Performance Have a Substitution Effect on the Impact of Enterprise Green Innovation: Evidence from China

“…Better social responsibility can also help enterprises obtain funds to improve production technology and service quality, so as to improve their market competitiveness and increase shareholders’ wealth [ 18 ]. From the perspective of corporate governance, corporate governance factors such as a good management system [ 19 ] and internal control level [ 20 ] significantly encourage green innovation.…”