IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v99y2025ics1059056025001339.html
   My bibliography  Save this article

The green innovation effect of the digital economy

Author

Listed:
  • Chen, Keren
  • Zhao, Shenghan
  • Jiang, Gaozhe
  • He, Yafeng
  • Li, Hui

Abstract

While the digital economy promises significant advancements, its role in driving corporate environmental sustainability, particularly green innovation, remains underexplored. This study investigates how the digital economy affects green innovation in Chinese listed companies from 2010 to 2022. Constructing a comprehensive digital economy index, we find that it significantly promotes green innovation, an effect mediated by reduced agency costs and improved financial leverage. Moreover, a firm's digitalization level amplifies this positive relationship. Notably, the effect is more pronounced in non-high-polluting industries and non-state-owned enterprises. These findings underscore the potential of the digital economy to foster green innovation, offering valuable insights for policymakers and businesses seeking to integrate digital technologies for a sustainable future.

Suggested Citation

  • Chen, Keren & Zhao, Shenghan & Jiang, Gaozhe & He, Yafeng & Li, Hui, 2025. "The green innovation effect of the digital economy," International Review of Economics & Finance, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025001339
    DOI: 10.1016/j.iref.2025.103970
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056025001339
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2025.103970?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Pengpeng Yue & Aslihan Gizem Korkmaz & Zhichao Yin & Haigang Zhou, 2022. "The rise of digital finance: Financial inclusion or debt trap," Papers 2201.09221, arXiv.org.
    2. Dwivedi, Yogesh K. & Hughes, Laurie & Kar, Arpan Kumar & Baabdullah, Abdullah M. & Grover, Purva & Abbas, Roba & Andreini, Daniela & Abumoghli, Iyad & Barlette, Yves & Bunker, Deborah & Chandra Kruse,, 2022. "Climate change and COP26: Are digital technologies and information management part of the problem or the solution? An editorial reflection and call to action," International Journal of Information Management, Elsevier, vol. 63(C).
    3. Liang, Peng & Liang, Lin & Tang, Xinhui, 2024. "The impact of digital-oriented mergers and acquisitions on enterprise labor demand," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    4. Ma, Chong & Mao, Ji-Ye & An, Xiao-Peng, 2022. "The Driving Forces Behind the Phenomenal Rise of the Digital Economy in China," Management and Organization Review, Cambridge University Press, vol. 18(4), pages 803-815, August.
    5. Yu, Wanqing & Gan, Yufei & Zhou, Bingjun & Dai, Jiapeng, 2024. "Revisiting the economic policy uncertainty and resource rents nexus: Moderating impact of financial sector development in BRICS," International Review of Financial Analysis, Elsevier, vol. 94(C).
    6. Cui, Xiaona & Mohd Said, Ridzwana & Abdul Rahim, Norhuda & Ni, Mengjiao, 2024. "Can green finance Lead to green investment? Evidence from heavily polluting industries," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    7. Zhou, Mengling & Huang, Zizhen & Jiang, Kangqi, 2024. "Environmental, social, and governance performance and corporate debt maturity in China," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    8. Matos, Stelvia & Viardot, Eric & Sovacool, Benjamin K. & Geels, Frank W. & Xiong, Yu, 2022. "Innovation and climate change: A review and introduction to the special issue," Technovation, Elsevier, vol. 117(C).
    9. Dai, Jiapeng & Mehmood, Usman & Nassani, Abdelmohsen A., 2025. "Empowering sustainability through energy efficiency, green innovations, and the sharing economy: Insights from G7 economies," Energy, Elsevier, vol. 318(C).
    10. Hunjra, Ahmed Imran & Bouri, Elie & Azam, Muhammad & Azam, Rauf I & Dai, Jiapeng, 2024. "Economic growth and environmental sustainability in developing economies," Research in International Business and Finance, Elsevier, vol. 70(PA).
    11. Raihan, Asif, 2024. "A review of the potential opportunities and challenges of the digital economy for sustainability," Innovation and Green Development, Elsevier, vol. 3(4).
    12. Shen, Zhiyang & Wang, Songkai & Boussemart, Jean-Philippe & Hao, Yu, 2022. "Digital transition and green growth in Chinese agriculture," Technological Forecasting and Social Change, Elsevier, vol. 181(C).
    13. Jiang, Hong & Murmann, Johann Peter, 2022. "The Rise of China's Digital Economy: An Overview," Management and Organization Review, Cambridge University Press, vol. 18(4), pages 790-802, August.
    14. Dai, Jiapeng, 2025. "Is policy pilot a viable path to sustainable development? Attention allocation perspective," International Review of Financial Analysis, Elsevier, vol. 98(C).
    15. Su, Hsin-Ning & Moaniba, Igam M., 2017. "Does innovation respond to climate change? Empirical evidence from patents and greenhouse gas emissions," Technological Forecasting and Social Change, Elsevier, vol. 122(C), pages 49-62.
    16. Ye, Xiang & Yue, Pengpeng, 2024. "What matters to reshaping consumption patterns in China? Digital inclusion and supply chain," Finance Research Letters, Elsevier, vol. 59(C).
    17. Yue, Pengpeng & Korkmaz, Aslihan Gizem & Yin, Zhichao & Zhou, Haigang, 2022. "The rise of digital finance: Financial inclusion or debt trap?," Finance Research Letters, Elsevier, vol. 47(PA).
    18. David W. Parker & Uwe Dressel & Delroy Chevers & Luca Zeppetella, 2018. "Agency theory perspective on public-private-partnerships: international development project," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 67(2), pages 239-259, February.
    19. Li, Lu & Zhou, Shiqi & Xu, Wei & Dai, Jiapeng, 2024. "Green innovation's impact on corporate financing: New insights from BRICS economies," Finance Research Letters, Elsevier, vol. 62(PB).
    20. Xu, Dandan & Guo, Dongli & Yue, Pengpeng & Li, Mengshi, 2024. "Household green consumption: Does digital inclusion matter?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    21. Zhou, Dan & Kautonen, Mika & Dai, Weiqi & Zhang, Hui, 2021. "Exploring how digitalization influences incumbents in financial services: The role of entrepreneurial orientation, firm assets, and organizational legitimacy," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    22. Zhou, Linjiang & Shi, Xiaochuan & Bao, Yaxiong & Gao, Lihua & Ma, Chao, 2023. "Explainable artificial intelligence for digital finance and consumption upgrading," Finance Research Letters, Elsevier, vol. 58(PC).
    23. Lianying Yao & Xiaoli Yang, 2022. "Can digital finance boost SME innovation by easing financing constraints?: Evidence from Chinese GEM-listed companies," PLOS ONE, Public Library of Science, vol. 17(3), pages 1-20, March.
    24. Carlsson, Bo, 2004. "The Digital Economy: what is new and what is not?," Structural Change and Economic Dynamics, Elsevier, vol. 15(3), pages 245-264, September.
    25. Abubakari S.Gwelo, 2019. "Principal Components To Overcome Multicollinearity Problem," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 4(1), pages 79-91, March.
    26. Zhang, Dongyang & Bai, Dingchuan & Wang, Cao & He, Yurun, 2024. "Distribution dynamics and quantile dynamic convergence of the digital economy: Prefecture-level evidence in China," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    27. Murmann, Johann Peter, 2022. "Forum on ‘The Rise of China's Digital Economy’," Management and Organization Review, Cambridge University Press, vol. 18(4), pages 788-789, August.
    28. Lu, Jing & Wang, Jun, 2021. "Corporate governance, law, culture, environmental performance and CSR disclosure: A global perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 70(C).
    29. Tian, Guangning & Li, Bo & Cheng, Yue, 2022. "Does digital transformation matter for corporate risk-taking?," Finance Research Letters, Elsevier, vol. 49(C).
    30. Hao, Jing & Peng, Mengzu & He, Wenjia, 2023. "Digital finance development and bank liquidity creation," International Review of Financial Analysis, Elsevier, vol. 90(C).
    31. Di Vaio, Assunta & Palladino, Rosa & Pezzi, Alberto & Kalisz, David E., 2021. "The role of digital innovation in knowledge management systems: A systematic literature review," Journal of Business Research, Elsevier, vol. 123(C), pages 220-231.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ruixiang Li & Gyung-yong Song, 2025. "Digital Commerce as a Catalyst for Ecological Transformation: Evidence from China’s Manufacturing Sector," Sustainability, MDPI, vol. 17(8), pages 1-21, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xing, Manjiang & Gong, Chi & Moon, Gyu-Hyen & Ge, Xiaohong, 2025. "Digital economy, dual innovation capability and enterprise labor productivity," International Review of Financial Analysis, Elsevier, vol. 101(C).
    2. Xia, Weifeng & Ruan, Zhiyu & Ma, Shenglin & Zhao, Jin & Yan, Jiale, 2025. "Can the digital economy enhance carbon emission efficiency? Evidence from 269 cities in China," International Review of Economics & Finance, Elsevier, vol. 97(C).
    3. Dai, Siwei & Tang, Daoyun & Li, Yunfeng & Lu, Huaixin, 2025. "Digital trade, trade openness, FDI, and green total factor productivity," International Review of Financial Analysis, Elsevier, vol. 97(C).
    4. Li, Pengcheng & Guo, Xiaochuan & Wang, Fengzheng & Zhang, Qifeng, 2025. "Digital transformation and corporate innovation boundaries: Role of supply chain concentration and transparency," International Review of Financial Analysis, Elsevier, vol. 98(C).
    5. Liu, Yuanyuan & Liu, Qianqian & Wei, Yanqiu, 2025. "Digital finance, internal control, and audit quality," Finance Research Letters, Elsevier, vol. 76(C).
    6. Wang, Wei & Cao, QiangYuan & Li, Zhouyang & Zhu, JinYing, 2025. "Digital transformation and corporate environmental performance," Finance Research Letters, Elsevier, vol. 76(C).
    7. Li, Haibo & Xiao, Biyun, 2025. "Strengthening provincial export resilience through the digital economy: Analysis of impacts, global value chain integration, and regional disparities in China," Finance Research Letters, Elsevier, vol. 76(C).
    8. Ding, Qiaoying & He, Wensheng & Deng, Yanfang, 2025. "Can tax reduction incentive policy promote corporate digital and intelligent transformation?," International Review of Financial Analysis, Elsevier, vol. 99(C).
    9. Liu, Jintao & Wang, Xiuhai, 2025. "Exploring the driving effect of the digital economy on rural labor force's occupational transformation: Based on analysis of CFPS panel data," International Review of Financial Analysis, Elsevier, vol. 101(C).
    10. Zhang, Qixin & Xiang, Zhiqiang & Xiang, Zhiguo, 2025. "New media supervision, digital transformation, and corporate green investment," Finance Research Letters, Elsevier, vol. 76(C).
    11. Liu, Dongming & Tu, Yongqian & Chen, Zhangzhang & Zheng, Yinglong, 2025. "Analysis of the synergistic effect of digital financial inclusion and social security on crime governance based on regional differences," International Review of Economics & Finance, Elsevier, vol. 98(C).
    12. Hu, Siyang & Liu, Dongyang, 2025. "Digital economy, financial literacy, and financial risk-taking in rural households," International Review of Economics & Finance, Elsevier, vol. 98(C).
    13. Liang, Guibao & Xia, Qiao & Zhang, Lijie, 2025. "Nonlinear influence of digital finance on green economic efficiency," International Review of Financial Analysis, Elsevier, vol. 101(C).
    14. Li, Xiaoqi & Zhu, Siyi, 2025. "How digital transformation can affect corporate technology innovation: The role of income gap," Finance Research Letters, Elsevier, vol. 75(C).
    15. Li, Yuantian & Xu, Haoyu & Li, Huiru & Xu, Yingming, 2025. "Digital economy, environmental regulations, and green economic development," Finance Research Letters, Elsevier, vol. 75(C).
    16. Li, Yunxian & Li, Fen, 2025. "Digital economy, the income gap, and regional crime rates in China," Finance Research Letters, Elsevier, vol. 75(C).
    17. Li, Fan, 2025. "Pledge of controlling shareholder's equity, digital transformation, and green innovation," Finance Research Letters, Elsevier, vol. 76(C).
    18. Jie, Honglan & Gooi, Leong Mow & Lou, Yanchun, 2025. "Digital maturity, dynamic capabilities and innovation performance in high-tech SMEs," International Review of Economics & Finance, Elsevier, vol. 99(C).
    19. Liu, Meihan & Zhao, Jingjie & Liu, Hongtao, 2025. "Digital transformation, employee and executive compensation, and sustained green innovation," International Review of Financial Analysis, Elsevier, vol. 97(C).
    20. Zhang, Yujin & Ye, Shujun & Liu, Jie & Zhang, Lulu & Li, Jiayi, 2025. "Can digital transformation of commercial banks reduce green credit risks?," International Review of Financial Analysis, Elsevier, vol. 99(C).

    More about this item

    Keywords

    Digital economy; Green innovation; Agency costs; Financial leverage; Digitalization; China;
    All these keywords.

    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
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025001339. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.