Complementary or substitutive effects? The duality of digitalization and ESG on firm's innovation

Lan Lan and Zhifang Zhou

Technology in Society, 2024, vol. 77, issue C

Abstract: As an increasing number of companies are recognizing digitalization and sustainability to be important components of their overall business strategies, there is a growing need to evaluate the innovative outcomes of these two strategies. This study examines the dual effects of a digital orientation and a corporate environmental, social, and governance (ESG) orientation on firm innovation under firm resource constraints. The empirical results confirm the hypothesis that digitization and ESG practices promote corporate innovation. In addition, a combined effect of ESG and digitization strategies on innovation performance is confirmed, but this effect is substitutive for resource-constrained enterprises, such as those with high levels of financing constraints and small and medium-sized enterprises. The role in supporting or hindering the synergy between digitalization and ESG strategies in different regions and industry sectors may various. Enterprises should prudently implement a dual strategy encompassing both digitalization and ESG while fully considering the inherent interaction of the two to improve the level of strategic synergy.

Keywords: Digital orientation; ESG orientation; Innovation performance; Dual effect; Resource constraints (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:teinso:v:77:y:2024:i:c:s0160791x24001155

DOI: 10.1016/j.techsoc.2024.102567

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