Firms' digitalization in manufacturing and the structure and direction of green innovation

Green innovation will be one of the main drivers of future economic development. In the current wave of digital transformation, there is a paucity of literature that considers how corporate digital transformation affects green innovation and the characteristics of green innovation. Based on the data of China A-share listed manufacturing companies from 2007 to 2020, we find that digital transformation significantly improves corporate green innovation. This conclusion is robust to a series of robustness tests. The mechanism analysis finds that digital transformation promotes green innovation by increasing the investment of innovation resources and reducing the cost of debt. We further find that digital transformation significantly increases the number of citations of green patents, reflecting the pursuit of “quality” of green innovation by enterprises. At the same time, digital transformation is conducive to the simultaneous improvement of “source reduction” and “end-cleaning” green innovation, reflecting the combination of different pollution governance methods at the source and end of the enterprise. Finally, digital transformation can sustainably improve the level of green innovation. Our findings provide useful insights for promoting green technology innovation in emerging markets.