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Does digital-physical technology integration improve corporate ESG ratings? Evidence from China

Author

Listed:
  • Liu, Yaxian
  • Li, Mingyu
  • Yu, Yong

Abstract

This paper examines the impact of digital-physical technology integration on corporate ESG ratings, addressing an important gap in the literature on corporate sustainability. Using Chinese corporate patent data from 2014 to 2023, we construct a firm-level measure of digital-physical technology integration and empirically assess its effects on ESG ratings. The results show that digital-physical technology integration significantly improves corporate ESG ratings, with enhanced resource acquisition capability and innovation capacity serving as key underlying mechanisms. The positive effect is more pronounced among state-owned enterprises, firms with higher governance efficiency, high-tech firms, heavily polluting firms, and firms located in regions with more advanced digital infrastructure and stronger rule of law. Moreover, digital-physical technology integration strengthens corporate social responsibility and increases firm value. Overall, these findings provide new insights into the role of technology integration in promoting corporate sustainability and offer policy-relevant evidence for improving ESG performance, particularly in developing economies.

Suggested Citation

  • Liu, Yaxian & Li, Mingyu & Yu, Yong, 2026. "Does digital-physical technology integration improve corporate ESG ratings? Evidence from China," Economic Modelling, Elsevier, vol. 159(C).
    • Handle: RePEc:eee:ecmode:v:159:y:2026:i:c:s0264999326000945
    DOI: 10.1016/j.econmod.2026.107565
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    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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