Digital economy, innovation, and firm value: Evidence from China

In this study, we investigate the impact of the digital economy's development on corporate innovation and value, utilizing data from listed firms in China spanning the years 2011 to 2018. Our findings reveal a positive correlation between digital economy development and corporate innovative activities, particularly pronounced in growth-stage firms, labor-intensive enterprises, and companies in underdeveloped regions. To establish a causal relationship, we employ a quasi-experimental approach utilizing the "Broadband China" pilot program. Through a difference-in-difference framework, we establish a causal link between digital economy advancement and increased innovative activities. Furthermore, our research underscores that digital economy development enhances firm value by promoting innovation. These results support the view that the digital economy plays a pivotal role in increasing firm value and fostering sustainable development in the overall economy.