Digital transformation and corporate innovation: the trade-off between financing obtained and risk increasing

Purpose Due to various constraints, there are limitations in the use of digital technology to enhance corporate innovation capabilities. Design/methodology/approach This paper examines the relationship between digital transformation (DT) and corporate innovation by taking A-share listed companies in Shanghai and Shenzhen from 2009 to 2020 as samples, and uses path analysis method to test the mechanism of the relationship between them, and further examines its moderating effect on the relationship between DT and corporate innovation from the perspective of absorptive capacity. Findings The results show that: (1) DT has an “too much of a good thing” effect on corporate innovation, and there is a significant inverted U-shaped relationship between them; (2) The reduction of financing constraints and the enhancement of operating risks caused by DT determine the inverted U-shaped relationship between the DT and corporate innovation; (3) Technology absorptive capacity significantly moderates the inverted U-shape relationship between DT and corporate innovation. When the technology absorptive capacity is low, the inhibitory effect of excessive digitalization on corporate innovation will be more obvious. Originality/value The originality of this article is as follows: It reveals the non-linear relationship between DT and corporate innovation from the perspective of “excess being as bad as deficiency”, identifies the dual mediating mechanism of financing constraints and operational risks through path analysis, and introduces technology absorptive capacity as a key moderating variable, thereby deepening the understanding of the boundary conditions for the realization of the value of DT, thus providing new exploration and new solutions for the DT practice of Chinese enterprises.