Regional digitalization, dynamic capabilities and green innovation: Evidence from e-commerce demonstration cities in China

In China's pursuit of digital and green transformation, this study examines the impact of regional digitalization on local firms' green innovation performance. The study develops a theoretical framework based on dynamic capabilities theory to explore how regional digitalization affects green innovation performance of local firms. Employing a quasi-natural experiment involving the National E-commerce Demonstration Cities policy in China, the study conducts empirical analysis using data from listed companies in China during the period 2007-2021. The findings suggest that regional digitalization can increase the quantity and quality of local firms' green innovations by improving their dynamic capabilities, such as sensing, seizing, and reconfiguring. Moreover, the impact of regional digitalization on green innovations is more pronounced in private companies and those with a strong foundation for green transformation. Furthermore, a synergistic effect on green innovations is observed between digitalization policy and its enforcement by local governments. A series of tests, including endogeneity analysis, confirm the robustness of our findings.