Digital Transformation, Green Innovation, and Pollution Abatement: Evidence from China

Abstract

The advent of novel and potent digital technologies has substantially transformed ways enterprises undertake their production. How digital transformation will reshape the production model of enterprises and have an impact on pollution emissions is a crucial problem in existing research. In this paper, we construct a theoretical framework to illuminate the theoretical mechanism of firms employing digital technology to bring out pollution abatement effect. Using a series of firm-level datasets from China, this paper introduces fixed-effect specification to empirically examine the environmental effects triggered by digital transformation. We find a negative effect of digital transformation on firms’ pollution emissions. The results are robust when potential endogeneity and mismeasurement problems are controlled for. Factors related to green innovation and investments in pollution abatement are found to play an important role in shaping the nexus between digital transformation and firm-level pollution emissions. This paper provides supporting firm-level evidence for the pollution abatement effect of digital transformation, which is essential for accelerating the construction of the digital economy, promoting the synergistic effect of digital transformation and green development, and achieving a balanced development of economic growth and environmental governance.