Rooted or expansive? The impact of digital-physical technological integration on corporate knowledge breadth

Abstract

Amid the deep transformation of traditional industries driven by the digital economy, firms face a critical challenge in restructuring their knowledge systems to achieve innovation breakthroughs. This study investigates the core question of whether and how digital-physical integration affects corporate knowledge breadth. Using panel data of Chinese listed firms, we construct firm-level indicators for digital-physical integration and knowledge breadth. The analysis is conducted through two-way fixed effects models, instrumental variable methods, and propensity score matching. Furthermore, we examine three mediating mechanisms—dynamic capability, asset novelty, and total factor productivity to uncover the pathways through which integration exerts its influence. The results show that digital-physical integration significantly promotes the expansion of corporate knowledge breadth. This finding remains robust across various endogeneity controls and sensitivity checks. Mechanism analysis reveals that integration indirectly drives the external restructuring of knowledge structures by enhancing firms’ dynamic capabilities, optimizing resource allocation patterns, and improving productivity. Heterogeneity analysis further indicates that the effect is more pronounced among non-technology-intensive firms, non-state-owned enterprises, firms located in regions with higher human capital, and those in areas with weaker intellectual property protection. By shifting the analytical focus to knowledge organization, this study deepens the understanding of the consequences of digital transformation and extends the theoretical boundaries of corporate knowledge evolution and technological integration. The findings also offer practical insights for policymakers designing differentiated digital strategies and for firms aiming to build effective knowledge coordination systems.