Digital transformation, innovation capability, and ESG performance

Qiong Liu and Hairong Wang

Finance Research Letters, 2025, vol. 78, issue C

Abstract: This study investigates how digital transformation (DT) affects environmental, social, and governance (ESG) performance through innovative capabilities in Chinese A-share listed companies from 2010 to 2022. Analyzing 31,323 firm-year observations, we demonstrate that DT directly and indirectly improves ESG performance through breakthrough and incremental innovation routes. Breakthrough innovations offer revolutionary sustainability solutions through invention patents; meanwhile, incremental innovations enable continuous improvement of sustainable practices. DT has a stronger effect on social and governance dimensions than on environmental performance, with a greater impact in non-pollution industries and state-owned enterprises. Findings underscore how different innovation types translate digital capabilities into improved ESG performance in various contexts.

Keywords: Digital transformation; ESG performance; Breakthrough innovation; Incremental innovation; Sustainability (search for similar items in EconPapers)
JEL-codes: L25 M14 O32 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612325004295
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325004295

DOI: 10.1016/j.frl.2025.107166

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().