Digital economy, financing constraints, and corporate innovation

Abstract

We build a multi-sector Schumpeterian endogenous growth model that incorporates data as a factor of production, and explore the changes in corporate financing constraints brought about by the digital economy and its impact on corporate innovation. Next, we use data on 3328 A-share listed firms in China for the period from 2011 to 2021 to empirically test our model. The results show that the impact of the digital economy on corporate innovation is positive and significant. After multiple rounds of robustness tests and resolution of endogeneity problems, our conclusion holds. In addition, we find that financial constraints act as a transmission mechanism through which the digital economy promotes corporate innovation. After categorizing patents into invention and non-invention patents, we find that the role of the digital economy is more (less) obvious in promoting radical (incremental) innovation. In addition, the role of the digital economy in promoting innovation is stronger for large enterprises than for small and micro enterprises. In summary, from the perspective of financing constraints, this paper studies the impact of the digital economy on corporate innovation using the endogenous growth model and providing empirical evidence. The results are of great significance to attempt to improve independent innovation capability and achieve high-quality economic development.