Going out and bringing in: Exploring the impact of OFDI on green innovation performance under firms' digital transformation strategies

Under the digital transformation strategy, whether the overseas investment activities of firms can achieve reverse green spillover is significant to their implementation of green and low‐carbon transformation. Accordingly, we examined the impact of outward foreign direct investment (OFDI) on green technology innovation (GTI) in parent firms under the digital transformation strategy at the micro‐level using a zero‐inflated negative binomial regression (ZINB) model with data from Chinese A‐share listed firms for 2000–2021. The study shows that (1) OFDI is beneficial to the growth of the parent firm's GTI. The results of both the instrumental variables approach and robustness tests support the baseline findings. (2) The scale, competitive, and human capital effects are the three micro‐mechanisms through which OFDI drives GTI. (3) Digital transformation has a positive moderating effect on OFDI and GTI, implying that digital transformation reinforces the reverse green spillover effect of OFDI. (4) The results of heterogeneity analysis show that state‐owned firms and firms with overseas executives have a more outstanding contribution of OFDI to GTI, and the moderating effect of digital transformation is more significant. This study provides micro‐level theoretical and empirical experiences on the green innovation effects of firms' digital transformation and overseas investment strategies.