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Digital innovation and firm internationalization: Insights from publicly listed firms in China

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  • Wu, You
  • Xu, Wanyu

Abstract

This study explores the role of digital innovation in facilitating the internationalization of firms in emerging markets, focusing on the perspective of knowledge flow. Analyzing data from Chinese publicly listed firms between 2004 and 2022, we find that digital innovation—both product and process— positively influences firm internationalization. This relationship is further strengthened by a firm's market presence and its environmental, social, and governance ranking. The international flow of a firm's knowledge—reflected in the adoption and diffusion of its innovations in foreign markets—is crucial in linking digital innovation to firm internationalization. Firms that engage in more digital innovation and have broader global knowledge dissemination achieve higher levels of internationalization. Heterogeneity analysis reveals that the impact of digital innovation on internationalization significantly differs based on firm characteristics, such as size, ownership type, and capability. This study underscores the crucial importance of digital innovation and global knowledge dissemination in firms' international expansion.

Suggested Citation

  • Wu, You & Xu, Wanyu, 2025. "Digital innovation and firm internationalization: Insights from publicly listed firms in China," Economic Modelling, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:ecmode:v:151:y:2025:i:c:s026499932500207x
    DOI: 10.1016/j.econmod.2025.107212
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    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration

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