How does digital technology facilitate the green innovation of enterprises? Evidence from China

ABSTRACTEmploying annual reports (2007–2019) of Chinese A-share listed firms, we develop a firm-level digital technology application index using text analysis to investigate the impact of digital technology on an enterprise’s green innovation. The results indicate that, first, the application of digital technology significantly increases the level of green innovation of enterprises and will continue to have a positive impact over the next three years. Second, we demonstrate three mechanisms by which digital technology influences green innovation: namely, alleviating financial constraints, empowering the upgrading of human capital structure, and promoting R&D (research and development) cooperation. Third, we find that enterprises can only promote green innovation by integrating digital technology into their production, operation, and management processes. Furthermore, the positive impact of digital technology on green innovation was predominantly observed in businesses located in regions with a high level of environmental protection awareness and with limited environmental governance capacity.KEYWORDS: Digital technologygreen innovationfinancial constraintshuman capitalR&D cooperationJEL CLASSIFICATION: D21G18M10 AcknowledgmentsThis work was supported by the National Natural Science Foundation of China under Grant [numbers 71903210 & 72274228]; Beijing Social Science Fund Project under Grant [number 21DTR010].Disclosure statementNo potential conflict of interest was reported by the authors.Notes1. Representative documents include Outline of Action for Promoting Big Data Development, Development Plan for the Next Generation of Artificial Intelligence, Implementation Guide for Promoting Cloud on Enterprise, Special Action Plan for Digital Empowerment of Small and Medium-sized Enterprises and Statistical Classification of Digital Economy and Core Industries. Research reports for reference include China Digital Economy Development White Paper, Cloud Computing White Paper, Trusted Artificial Intelligence White Paper, Artificial Intelligence Core Technology Industry White Paper, Virtual Reality White Paper, Blockchain White Paper, Big Data White Paper, IoT White Paper and Industrial Internet Industry Economic Development Report. The above research reports are from the China National Academy of Information and Communication (CAICT).Additional informationFundingWeizeng Sun reports financial support was provided by National Natural Science Foundation of China. Weizeng Sun reports financial support was provided by Beijing Social Science Fund Project.