Digital innovation, investment efficiency and total factor productivity: evidence from enterprise digital patents

In the era of the digital economy, enterprises face the imperative of engaging in digital innovation to effectively respond to market competition. As total factor productivity (TFP) is a critical indicator of evaluating an enterprise's sustainable development goals, this study examines the causal relationship between digital innovation and TFP using digital patent data from listed Chinese companies between 2010 and 2021. The findings reveal a positive and robust relationship between digital innovation and TFP. The channel analysis demonstrates that digital innovation enhances TFP by curbing excess investment, thereby confirming the micro mechanism of digital innovation -> investment efficiency -> TFP. The heterogeneity analysis reveals that the positive impact of digital innovation on TFP is particularly prominent in capital-intensive industries, large-scale enterprises, and state-owned enterprises. Additionally, digital innovation is found to have a positive influence on TFP across the stages of an enterprise's lifecycle. This study contributes to the literature by expanding the understanding of the economic consequences of digital innovation for businesses, particularly from the perspective of digital patents, enriches the literature on enhancing TFP, and provides valuable insights for enterprises seeking to achieve their sustainable development goals.