Economic policy uncertainty and innovation: the moderating role of digital transformation

Xiaohui Xu, Weihao Wang and Jun Yang

Applied Economics Letters, 2025, vol. 32, issue 9, 1246-1252

Abstract: This study examines the effect of economic policy uncertainty (EPU) on innovation and the moderating effect of digital transformation on this relationship, by using a dataset of 27,717 observations of Chinese A-share listed firms from 2007 to 2020. The main findings are as follows: Firstly, the panel fixed models indicate a negative relationship between EPU and innovation. The moderating model shows that digital transformation mitigates the adverse effects of EPU on innovation. This is accomplished by reducing information asymmetry and improving information processing capabilities. Our findings provide valuable insights into the impact of digital transformation on innovation in enterprises and the effectiveness of businesses’ implementation of digital transformation, especially in the context of economic policy uncertainty.

Date: 2025
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DOI: 10.1080/13504851.2024.2302885

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