How do Internet applications affect process innovation in Chinese manufacturing companies?

• Published in: Economic research - Ekonomska istraživanja 2023-12, Vol.36 (1)
• Main Authors: Li, Xiaokai, Li, Xingong, Ding, Sheng
• Format: Article
• Language: English
• Subjects: Application; Companies; Economic theory; Innovations; Internet; Internet applications; Manufacturing; manufacturing companies; Ownership; process innovation; Transformation
• ISSN: 1331-677X; 1848-9664
• DOI: 10.1080/1331677X.2022.2120045

This study distinguishes between two dimensions of firm process innovation, namely, quantity and quality, and uses data from the World Bank's China Manufacturing Firm Survey to analyse the differential impact of Internet applications on the quantity and quality of process innovation and their mechanisms of action. Internet applications have a significant facilitating effect on the quantity and quality of process innovation. However, from the perspective of the average marginal effect, the facilitating effect of Internet applications on the quantity of process innovation is greater than that on the quality of process innovation. Further analysing firm size, industry, ownership, and regional heterogeneity shows that in terms of the quantity of process innovation, Internet applications have a greater impact on small- and medium-sized firms, labour-intensive firms, non-state-owned firms, and eastern firms. As for the quality of process innovation, Internet applications have a stronger promoting effect on large firms, technology-intensive firms, and state-owned firms. The mechanism test reveals that open innovation and informatisation capability play a mediating role in the influence of a firm's Internet applications on process innovation. This study provides micro-empirical evidence for firms' Internet applications to promote process innovation and policy insights into China's manufacturing transformation and upgrading.