Technology choices for polluting firms in China: the synergy between digital transformation and green transformation

Optimizing technology management for polluting firms is crucial for pollution control and climate change mitigation. In contrast to the extensive research on green innovation, technical renovation has often been overlooked, and the influence of digital technology remains ambiguous. Using a dataset of Chinese polluting industries, we employ the panel fixed effect model. Our findings are as follows: (1) When confronted with local environmental governance pressure, firms tend to rely more on technical renovation. Nevertheless, small-scale firms and those located in the eastern provinces demonstrate a markedly weaker response; (2) In exploring the underlying causes, we find that local environmental governance pressure exacerbates the financing constraints of small-scale firms. For firms in the eastern provinces, empirical evidence suggests that they have embarked on the path of independent innovation by accumulating the achievements of technical renovation; (3) Further analysis reveals a synergistic effect between digital transformation and green transformation, which implies that the integration of digital technologies can accelerate the green transformation process of polluting firms. Our findings provide targeted policy implications for optimizing technology management for polluting firms.