Does digital transformation promote the volatility of firms' innovation investment?

Abstract

With the advent of the digital age, digital transformation has become an important way for enterprises to enhance their competitiveness. Using a large sample of Chinese A‐share listed companies from 2008 to 2019, we explore the impact of digital transformation on firms' innovation investment volatility. The research conclusions include the following aspects: (1) There is a positive correlation between digital transformation and innovation investment volatility. Mechanism analysis digital transformation promotes the volatility of firms' innovation investment by alleviating financing constraints and enhancing the ability to identify and seize innovation opportunities. (2) The positive correlation between digital transformation and the volatility of firms' innovation investment is more obvious in large‐sized enterprises and non‐high‐tech industrial enterprises. (3) Digital transformation reinforces the positive correlation between the volatility of firms' innovation investment and firms' patent applications for invention. This research expands the relevant research on the micro‐consequences of digital transformation and innovation strategy from a dynamic perspective.

Hear all parties: Peer effect of digital transformation on long‐term firm investment in China

“…Compared with the positive influence, the reduction influence of digital transformation on long-term firm investment is a greater study contribution (Liao et al, 2023;Xu, Guo, & Wen, 2023;Zhang et al, 2023). The findings of the present study suggest that the peer effect of digital transformation can result in positive indicators related to the capacity of the firm to adopt and learn from the successful investment strategies of their peer companies over time.…”

“…The digital transformation efforts undertaken by peers can decrease the long-term investment of the focal firm by enhancing its equity investment structure and refining its asset-light strategies. The current findings offer fresh insights into the influence mechanism between the digital transformation of peer firms and long-term firm investment, in contrast to the effect of digital transformation on innovation investment as reported by Zhang et al (2023) and investment inefficiency as discussed by Xu, Li, et al (2023). The current study contributes to a more comprehensive understanding of the factors driving the influence mechanism and the digital policy implications of longterm firm investment.…”

“…First, digital transformation can lower both internal and external transaction costs and reduce managerial and production costs; in addition, it can restrain overly optimistic expectations within the management, significantly inhibiting cost stickiness (Chen & Xu, 2023). Second, digital transformation facilitates research and development (R&D) investment; stimulates firm innovation outcomes and enhances innovation efficiency; and promotes technological innovation and productivity growth (Gaglio et al, 2022;Guo et al, 2023;Li et al, 2023;Zhang et al, 2023). Third, digital transformation can enhance the operation efficiency and financial performance of the firm; as such, it is an important channel for firms to build a market competitive advantage (Li et al, 2023;Zhai et al, 2022).…”

“…Here, regional control effects are selected the headquarters of those firms registered in the same city. As shown in of digital empowerment on firm investments (Liao, et al, 2023;Zhang et al, 2023).…”

“…Second, digital transformation can improve operating costs, innovation performance, and market competition, among others (Chen & Xu, 2023;Guo et al, 2023;Li et al, 2023;Zhai et al, 2022;Zhang et al, 2023). Notably, the current research is aimed at exploring the interconnection of digital transformation (its peer effect) and longterm firm investment.…”