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Digital economy, dynamic capabilities, and corporate innovation boundary

Author

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  • Zhang, Xiaohan
  • Yang, Xi
  • Fu, Qiuyao

Abstract

This study examined how digital economic development impacts corporate innovation boundaries. We investigated the mediating role of dynamic capabilities and the heterogeneous effects across organizational contexts. Analyzing 19,346 firm–year observations from Chinese listed companies (2008–2022), digital economic development significantly expanded innovation boundaries, with this relationship partially mediated by innovative capability, adaptive capability, and absorptive capacity. The impact varies substantially across organizational settings: nonstate-owned enterprises respond more strongly than state-owned ones; regulated industries show greater expansion of innovation boundaries than nonregulated sectors; and traditional sectors reveal substantial potential for innovation driven by digital transformation. These findings indicate that digital economic development broadens innovation horizons directly and through enhanced internal capabilities and that its effects vary according to the organizational context. The findings enhance the understanding of digital innovation and organizational adaptation, offering valuable insights for managers and policymakers navigating the challenges of an increasingly digitalized economy.

Suggested Citation

  • Zhang, Xiaohan & Yang, Xi & Fu, Qiuyao, 2025. "Digital economy, dynamic capabilities, and corporate innovation boundary," Finance Research Letters, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324017045
    DOI: 10.1016/j.frl.2024.106675
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