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Digitalization, absorptive capacity, and innovation performance: Evidence from China’s hidden champion enterprises

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  • LIN, Min
  • LIU, Yan
  • REN, Jie

Abstract

Innovation in hidden champion enterprises has attracted growing scholarly attention due to their critical role in sustaining industrial competitiveness and resilience. This study investigates how digitalization influences the innovation performance of hidden champion enterprises in China and examines the mediating role of absorptive capacity and the moderating role of government subsidies. Using panel data from 171 A-share listed firms identified as national “single champion demonstration enterprises” in manufacturing between 2016 and 2021, we conduct an empirical analysis. The results demonstrate that higher levels of digitalization significantly enhance firms' innovation performance. Moreover, absorptive capacity positively mediates the relationship between digitalization and innovation outcomes. In addition, government subsidies exert a positive moderating effect, further strengthening the pathway from digitalization and absorptive capacity to improved innovation performance. These findings contribute to the literature on digital transformation and innovation by revealing the mechanisms through which digitalization drives innovation in hidden champions.

Suggested Citation

  • LIN, Min & LIU, Yan & REN, Jie, 2026. "Digitalization, absorptive capacity, and innovation performance: Evidence from China’s hidden champion enterprises," Finance Research Letters, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finlet:v:89:y:2026:i:c:s1544612325025681
    DOI: 10.1016/j.frl.2025.109319
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