TY - JOUR
T1 - Navigating digital frontiers
T2 - The impact of China's cybersecurity law on corporate digital innovation
AU - Chen, Hongze
AU - Li, Conggang
AU - Liu, Jiatao
AU - Xu, Rong
N1 - Publisher Copyright:
© 2025 Elsevier Inc.
PY - 2025/7
Y1 - 2025/7
N2 - In this paper, we find that after the enactment of China's Cybersecurity Law, firms in core digital industries produce more digital innovation than those in industries with lower digital adoption. Leveraging this regulatory shift as a quasi-natural experiment, we examine its impact on corporate digital innovation using a text-based analysis of annual reports. The promotional effect of privacy regulations on digital innovation resembles the Porter hypothesis, which addresses the positive effect of environmental regulations on innovation. Our study delves into the nuanced dynamics, revealing that firms facing high market competition, customer concentration, and fewer financial constraints prioritize digital innovation. This research contributes by highlighting how strengthened data privacy regulation promotes firms' digital innovation, fostering sustained growth and productivity in the digital era.
AB - In this paper, we find that after the enactment of China's Cybersecurity Law, firms in core digital industries produce more digital innovation than those in industries with lower digital adoption. Leveraging this regulatory shift as a quasi-natural experiment, we examine its impact on corporate digital innovation using a text-based analysis of annual reports. The promotional effect of privacy regulations on digital innovation resembles the Porter hypothesis, which addresses the positive effect of environmental regulations on innovation. Our study delves into the nuanced dynamics, revealing that firms facing high market competition, customer concentration, and fewer financial constraints prioritize digital innovation. This research contributes by highlighting how strengthened data privacy regulation promotes firms' digital innovation, fostering sustained growth and productivity in the digital era.
KW - Cybersecurity
KW - Digital innovation
KW - Digital privacy
KW - Privacy regulation
UR - http://www.scopus.com/inward/record.url?scp=105001479234&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2025.104182
DO - 10.1016/j.irfa.2025.104182
M3 - Article
AN - SCOPUS:105001479234
SN - 1057-5219
VL - 103
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 104182
ER -