Robots and firm innovation: Evidence from Chinese manufacturing

Automation technology-driven innovation, as a key component of the Fourth Industrial Revolution, has significantly increased in recent years with the rapid development of artificial intelligence and robots. This paper aims at investigating robots as an unconventional source of innovation and a driver of desirable outcomes such as sustainability. We study unconventional innovation with the adoption of robots through the lens of user innovation theory and carry out a series of empirical analyses by compiling a unique dataset containing firm characteristics, patent applications, and robot stock in Chinese manufacturing. The regression results show a positive and significant relationship between robots and firm innovation. We also find that robots drive firm sustainable innovation measured as patents that are related to environmental innovation. Lastly, we empirically analyze several mediating mechanisms of robots as the unconventional source of innovation through the factor-augmenting technology effect, substitution effect, and absorptive capacity effect.