Digitalization drives Sustainability: How digital trade enhances corporate ESG performance through innovation, internationalization and transparency

Puying Li · Qiang Wu

28 citations0/0 files storedInternational Review of Economics & Finance

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Digital Economy and Transformation Corporate Social Responsibility Reporting Sustainability and Innovation in Business

Abstract

This study examines the relationship between digital trade and corporate environmental, social, and governance (ESG) performance using panel data from Chinese listed firms between 2010 and 2022. Building on resource-based view and stakeholder theory, we develop and test a comprehensive framework that investigates both direct and indirect pathways through which digital trade affects ESG outcomes. Our analysis reveals that digital trade significantly improves overall ESG performance, demonstrating particularly strong effects on environmental and social dimensions. Through mediation analysis, we identify three key transmission mechanisms: technological innovation, internationalization level, and information transparency. Technological innovation emerges as the most powerful mediator, emphasizing how digital capabilities foster sustainable innovations. We address endogeneity concerns through instrumental variables, propensity score matching, and Heckman selection methods, confirming result robustness. Heterogeneity analysis shows that non-state-owned enterprises and mature firms demonstrate stronger capacity to translate digital capabilities into ESG improvements compared to state-owned enterprises and growth-stage firms respectively. This research contributes to the emerging literature connecting digitalization and sustainability by empirically establishing the multi-channel relationship between digital trade and ESG performance in an emerging market context. Our findings provide important implications for policymakers seeking to leverage digital economy development for sustainability objectives and for managers aiming to integrate digital transformation with ESG strategies. The results demonstrate that digital trade serves as a catalyst for corporate sustainability when supported by appropriate institutional frameworks and organizational capabilities.

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References

2015ESG and financial performance: aggregated evidence from more than 2000 empirical studies 2010Does Corporate Social Responsibility Affect the Cost of Capital?2023Media coverage and corporate ESG performance: Evidence from China 2023ESG in China: A review of practice and research, and future research avenues 2023Does digital innovation cause better ESG performance? an empirical test of a-listed firms in China 2021Evaluation of strategic and financial variables of corporate sustainability and ESG policies on corporate finance performance 2023Digital transformation and corporate ESG: Evidence from China 2024The impact of ESG responsibility performance on corporate resilience

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