Do digitalization policies promote enterprise innovation? The logic of cost heterogeneity of enterprises

Strengthening government guidance and policy support is an important path to promote digital transformation in various countries and enhance their core competitiveness in the digital era. This paper explores the differentiated feedback of enterprises with varying transformation costs in developing countries, using China as an example, towards government digital transformation policies. It finds that enterprises with low digital transformation costs provide positive feedback to government policies, while those with high costs exhibit limited and strategic feedback, resulting in differences in policy performance—specifically, innovation output. The analysis of mechanism indicates that lowering the costs of connectivity, integration, and financing for digital transformation will improve enterprises’ feedback on government-led policies and accelerate their own digital transformation processes. The capability to connect to the outside world, adapt to change, and mitigate financing constraints constructed by enterprises in the process of cost reduction will contribute to the development of their innovation activities, resulting in better innovation performance. The above logic is further verified empirically based on the quasi-experiment of Internet Plus promoted by the State Council of China in 2015. Therefore, to enhance the effectiveness of digital policies in developing countries, enterprises need to improve their dynamic adaptability and effectively reduce the costs of digital transformation. More importantly, the governments of developing countries should learn from developed countries in formulating digital transformation strategies and policies. They should create digital roadmaps suitable for their national development, forming targeted support policies for various types of enterprises, thereby providing real assistance for enterprises to break through and move forward.