Fake it till you make it: Digital washing and corporate innovation

Driven by the rapid development of digital economy, corporate digital transformation has become a key strategy for gaining competitive advantages. However, substantive transformation often requires substantial investment. Facing resource constraints, some enterprises engage in digital washing, shaping an advanced image through selective disclosure of digital transformation information with less substantive investment. Based on an integrated framework of signaling theory and resource dependence theory, this study uses Chinese A-share listed companies from 2007 to 2023 as the sample and employs a two-way fixed effects model to examine the relationship between digital washing and corporate innovation. This study finds: (1) digital washing significantly promotes corporate innovation; (2) digital washing primarily enhances corporate innovation through two pathways: attracting R&D personnel and promoting strategic alliance construction; (3) under high market competition environments and when the proportion of directors with R&D background on the board is higher, the promotional effect of digital washing on corporate innovation is more significant. After multiple robustness tests including instrumental variable method and propensity score matching method, the above results remain valid. The research reveals that digital washing is not simply opportunistic behavior, but has intertemporal strategic value. Enterprises acquire external resources through a “say first, do later” strategy and transform them into substantive innovation. This finding provides important insights for enterprise management practices, investor decision-making, and regulatory policy formulation.