Does digital transformation propel innovation strategies? An empirical investigation based on machine learning and the dynamic GMM approach

In today’s digital landscape, the transformation through digital technologies is revolutionizing traditional business models and innovation practices. Numerous organizations are accelerating their digital transformation efforts to enhance manufacturing capabilities, operational efficiency, and competitive advantage. While the significant role of digital transformation in economic development has been widely recognized in academic literature, research exploring the complex interplay between digital transformation and innovation strategies remains limited. This study aims to explore this relationship by utilizing annual report data and patent information from Chinese listed companies over the period from 2012 to 2021. Our findings indicate that digital transformation has a positive impact on both R&D input strategies and innovation output strategies. Specifically, it increases firms’ propensity to invest in R&D activities, thereby increasing potential future innovation returns. Moreover, digital transformation bolsters both strategic and substantive innovation by leveraging digital capabilities for better resource integration. This paper significantly contributes to the existing literature on digital transformation and innovation strategies, offering valuable insights that can facilitate higher levels of digital transformation and promote high-quality economic development.