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The impact of twin transition on firms' business performance: Empirical evidence from Korean manufacturing firms

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  • Choi, Jihoon
  • Kim, Yeong Jae

Abstract

This study empirically examines the impact of the joint adoption of eco-innovations and digital technologies—referred to as “the twin transition”—on firms' sales performance in the Korean manufacturing sector. The analysis, which uses data from the Korea Innovation Survey 2022 and employs an instrumental variable approach, propensity score matching, and the Heckman selection model, shows significant positive effects on sales for firms that adopt both eco-innovations and digital innovations. Specifically, the twin transition is associated with a range of positive increases in sales in 2021: the estimated local average treatment effect is approximately 84 %, while the average treatment effect on the treated ranges from 47 % to 57 %. We also found that sales increased significantly for firms that combined eco-innovation with a subset of digital innovations: AI, big data, IoT, cloud computing, 3D printing, and 5G. These findings highlight the strategic importance for firms to integrate eco-innovation with digital technologies to enhance their business performance. This research underscores the need for policies and incentives that support sustainable growth and competitive advantage by promoting the twin transition.

Suggested Citation

  • Choi, Jihoon & Kim, Yeong Jae, 2025. "The impact of twin transition on firms' business performance: Empirical evidence from Korean manufacturing firms," Energy Economics, Elsevier, vol. 149(C).
    • Handle: RePEc:eee:eneeco:v:149:y:2025:i:c:s0140988325005924
    DOI: 10.1016/j.eneco.2025.108765
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