Heterogeneous treatment effects of digital transformation on firms' innovation: Based on BART method

Jun Yang, Xinxin Lv, Xiaohui Xu and Xiaohua Chen

Pacific-Basin Finance Journal, 2024, vol. 85, issue C

Abstract: Previous studies test the average effect of digital transformation on firms' innovation, while few studies focus on the heterogeneous treatment effects. To fill this gap, this paper employs the advanced BART approach to examine the heterogeneous treatment effects of digital transformation on firms' innovation. Specifically, using panel data of 25,684 firm-year samples from Chinese A-share listed companies from 2007 to 2020, we figure out that the effect of digital transformation on innovation is various among firms. Additionally, by using NCA tool, we test the factors causing the heterogeneous treatment effects of digital transformation on innovation. The results show that, sufficient internal (or external) talent and digital infrastructure are essential conditions for the positive effect of digital transformation on innovation. Furthermore, the internal mechanism test discloses that digital transformation significantly enhances innovation by enhancing human capital and information processing capability. Our results shed light on the policy implications for emerging economics.

Keywords: Digital transformation; Innovation; Heterogeneous treatment effects; Bayesian additive regression trees (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001239

DOI: 10.1016/j.pacfin.2024.102372

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