Corporate digitalization and green innovation: Evidence from textual analysis of firm annual reports and corporate green patent data in China

Abstract

We investigate the effect of corporate digitalization capabilities on green innovation among Chinese‐listed firms. Using a panel dataset of 2908 companies from 2011 to 2020, we use textual analysis and entropy weighting on corporate annual reports to construct a yearly corporate digitalization index. Our findings show that corporate digitalization promotes green innovation, as evidenced by patent applications and grants. This relationship is stronger for firms with fewer financial constraints and in provinces with strong intellectual property protection. We also find the national digital policy of the “Internet Plus” strategy has a stronger positive effect on corporate green innovation for corporations with a higher degree of digitalization. Our results are robust to various alternative measures, econometric models, and different samples.

Integrating ESG into Corporate Strategy: Unveiling the Moderating Effect of Digital Transformation on Green Innovation through Employee Insights

“…Specifically, the augmentation of digitizing levels contributes to the diminution of management, innovation transactions, and contracting expenses, easing financial outcomes and fostering the advancement of green innovation [16]. Moreover, highly digital enterprises can optimize the integration of production factors and digital technologies, improving the efficiency of data collection, analysis, and reporting, further accelerating the process of green innovation [17]. This phenomenon reinforces the correlation between ESG performance and green innovation [18].…”