Digital Transformation and Substantive Innovation in High-Tech SMEs: Evidence from China

Abstract

Due to digital transformation, SMEs (SMEs)in the high-tech industry confront both possibilities and constraints. These businesses usually have constraints with regard to both personnel and financial resources. Considering the moderating influence of equitable incentives and government subsidies, This study investigates how substantive innovation and digital transformation relate to SMEs. The study's findings, which were based on panel data from Chinese companies listed on the Science and Technology Innovation Board from 2019 to 2022, show that digital transformation greatly improves substantive innovation in addition to fostering strategic innovation. Government subsidies improve the inventive effect of digitization and positively attenuate this relationship by easing financial stress. Conversely, equity incentives act as alternatives to digital transformation and have a moderating effect. Our findings add to the corpus of knowledge by clarifying how digitalization drives different forms of creativity in resource-constrained enterprises. Furthermore, For managers and policymakers looking to boost innovation outputs in competitive and dynamic marketplaces and speed up the digitization of SMEs, this study has practical consequences.