Breaking barriers to innovation: The power of digital transformation

This study analyzes the impact of digital transformation on corporate innovation. Based on a sample of Chinese listed companies during 2007-2019, we find that digital transformation has a positive impact on corporate innovation. Mechanism tests show that digital transformation helps alleviate corporate financial constraints and improve corporate governance, thus breaks barriers to corporate innovation. Heterogeneity analysis reveals that the positive impact of digital transformation on corporate innovation is more pronounced in high-tech industries and in industries with more intense competition. These findings enrich the growing literature on the economic consequences of digital transformation and have policy implications for promoting corporate innovation.