How does digital transformation affect innovation quality?

In the digital era, digital transformation is disrupting traditional business models and innovation activities. Numerous firms have expedited their endeavors in digital transformation to augment their manufacturing capabilities, operational efficiency, and competitive standing. Despite the increasing scholarly attention on the pivotal role of digital transformation in economic progress, there exists a paucity of research delving into the intricate nexus between digital transformation and innovation quality. The objective of this study is to investigate the relationship between digital transformation and innovation quality. Leveraging annual report data and patent information from Chinese listed companies spanning from 2012 to 2021, we have identified that digital transformation significantly enhances innovation quality. Interestingly, upon further investigation into the relationship between the five sub-dimensions of digital transformation (artificial intelligence, blockchain, cloud computing, big data, and digital technology applications) and innovation quality, positive and significant correlations were observed with artificial intelligence, cloud computing, big data, and digital technology applications, while blockchain did not exhibit a significant impact. Furthermore, the study reveals that the impact of digital transformation on innovation quality varies depending on property rights and regional location. Specifically, this promotional effect is significant only in non-state-owned enterprises and in the central and eastern regions. Overall, this paper enriches the research on digital transformation and innovation quality, providing valuable insights to promote the advancement of digital transformation levels for better serving the high-quality development of the real economy.