The Pilot Program of Digital Transformation for Small and Medium-Sized Enterprises and Corporate R&D Investment: Evidence from China's Listed Companies

Purpose: This study investigates the impact of the Pilot Program of Digital Transformation for Small and Medium-sized Enterprises (SMEs) on corporate R&D investment in China. It aims to understand how government-led digital transformation policies stimulate innovation and enhance sustainable competitiveness. Methodology/approach: Using panel data from A-share listed SMEs in China (2015–2023), a Difference-in-Differences (DID) model is employed, complemented by robustness tests, instrumental variable estimation, and Propensity Score Matching (PSM-DID). Mechanism and heterogeneity analyses identify the underlying channels and regional variations in policy effects. Originality/Relevance: This research provides novel empirical evidence on how digital transformation policies foster innovation investment and sustainable competitiveness. The model integrates perspectives from digital economy, corporate finance, and sustainability policy. Key findings: The pilot policy significantly increased R&D investment, with stronger effects observed in smaller firms, state-owned enterprises, and those located in eastern regions. Three main mechanisms were identified: (1) improved internal capital profitability, (2) strengthened market profitability expectations, and (3) enhanced urban FinTech ecosystem development. Theoretical/methodological contributions: The study advances theoretical understanding of how digital transformation policies influence innovation and sustainable competitiveness, offering implications for differentiated digital upgrading and regional coordination strategies.