Does Digital Innovation Improve Product Quality: Evidence From Automobile Recalls in China

In the context of digital economy, businesses are increasingly involved in diverse digital innovation initiatives with the aim of achieving high product quality. Despite this, there is no unanimous consensus on product quality, even in the realm of traditional technological innovation. Therefore, it is worth contemplating whether digital innovation in business invariably leads to enhanced product quality. This study investigates the interplay between the scale and value of digital innovation (DI-S and DI-V) and product recalls, which serve as a crucial indicator of product quality, while considering product variety as a moderating factor. The analysis is based on 1408 digital patent data collected from 31 automotive companies engaged in digital innovation activities from 2012 to 2020 in China. The findings reveal that while DI-S does not yield the expected significant impact on product quality, DI-V has a positive influence on product quality. Furthermore, businesses with a broader range of product categories can enhance product quality more effectively by focusing on improving DI-V, especially when compared to those with fewer product categories. This research offers practical insights into the implementation of digital innovation by businesses and holds significant importance in motivating government actions aimed at enhancing policies for achieving high-quality development.