The impact of digital transformation on corporate innovation: Roles of analyst coverage and internal control

Abstract It is critical to explore the mechanisms by which digital transformation (DT) influences firms' innovation performance (IP) in the pervasive digital epoch. This study constructs a serial mediation model to test the underlying mechanism of how DT affects IP. We find that DT can promote IP significantly, and such impact is heterogeneous. Mechanism tests reveal that analyst coverage and internal control quality have the serial mediation effects in the path of DT affecting IP. These findings still hold after several robustness checks. Our discoveries provide new theoretical and practical implications to the DT and innovation research domains.