Mystery of special government subsidies: how does digital transformation promote enterprise innovation and development?

The digital transformation of enterprises has become an important driving force in promoting the high-quality development of China's economy and in-depth implementation of an innovation-driven development strategy. To this end, this study uses the panel data of China's A-share listed enterprises from 2010 to 2019 to explore the relationship among enterprise digital transformation, government subsidies, and innovation. Results indicated that digital transformation can significantly stimulate enterprise innovation. The impact mechanism test shows that the digital transformation of enterprises can increase their R&D expenditure and alleviate their financing constraints, thereby jointly promoting enterprise innovation in terms of innovation resources and financing resources. Furthermore, heterogeneity analysis indicates that digital transformation has a greater incentive effect on private enterprises, non-technology enterprises, service industries, and growth stage enterprises. By introducing special financial subsidies for digital transformation, special financial subsidies for digital transformation are shown to have a positive impact on the sensitivity of digital transformation and enterprise innovation. This effect is also played out through innovation spending and corporate finance, and the role of long-term financing is greater than that of short-term financing. Therefore, the role of digital transformation in promoting enterprise innovation must be actively played to achieve a high-quality development of the regional economy.