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Can Digital Transformation be a Driver of R&D Intensity? Evidence from China

Author

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  • Tingqian Pu

    (School of Economics and Finance, Guizhou University of Commerce, China.)

Abstract

Research Question: Does digital transformation (DT) enhance firms' R&D intensity (RDI)? If so, which subdimensions of DT drive this effect? Does the DT-RDI relationship exhibit heterogeneity based on ownership, profitability, technological orientation, and geographic location? Motivation: While prior research has explored the broader economic impacts of DT, there is a gap in understanding which DT subdimensions drive RDI and how firm characteristics (e.g., ownership, profitability, technological orientation, and geographic location) shape this relationship. Idea: This study investigates whether DT is a driving factor of RDI through the lenses of resource-based theory, agency theory, and innovation diffusion theory. Data: The sample consists of 3,920 Chinese publicly listed firms from 2012 to 2021, with DT data sourced from annual report text analysis. Method/Tools: A series of panel analyses, including grouped t-tests and two-way fixed effects, were conducted. Robust standard errors clustered at the firm level were applied to address heterogeneity and cross-sectional dependence. Endogeneity tests using PSM, DID, and GMM estimations confirm the robustness of the findings. Findings: This study finds a positive relationship between DT and RDI, with key drivers being subdimensions such as artificial intelligence, cloud computing, and big data. The positive effect is stronger in state-owned, profitable, high-tech firms, and those located in eastern and central China. Contributions: First, this research expands the limited literature on how DT influences R&D strategies, focusing on R&D decision-making rather than just operational outcomes. Second, it unveils the role of DT's subdimensions in shaping R&D, offering insights into the strategic implications of the digital era. Third, by highlighting the heterogeneous effects of DT on RDI, the study provides actionable recommendations for enhancing firms’ R&D competitiveness through tailored digital strategies.

Suggested Citation

  • Tingqian Pu, 2025. "Can Digital Transformation be a Driver of R&D Intensity? Evidence from China," Capital Markets Review, Malaysian Finance Association, vol. 33(1), pages 1-23.
    • Handle: RePEc:mfa:journl:v:33:y:2025:i:1:p:1-23
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    More about this item

    Keywords

    Digital transformation; R&D intensity; artificial intelligence; cloud computing; big data; China;
    All these keywords.

    JEL classification:

    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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