1. Introduction
With economic and social development and population growth worldwide, the conflict between development and the environment is gradually becoming intense [
1]. Green economic development is one of the pivotal components of sustainable development, which focuses on the harmonious development of human society and nature [
2]. Meanwhile, the promotion of green economic development has become an essential step to building a beautiful China, which is of great significance to achieving “new progress in the construction of ecological civilization” as proposed in the national 14th Five-Year Plan [
3]. Digitalization is an essential engine that empowers green economic development. Digitization refers to a crucial means that deems digital knowledge and information as a key production factor, modern information networks as an important carrier, and the use of information and communication technology as an effective approach, ultimately promoting technological innovation, efficiency improvement, and economic structure optimization. Its high technological sophistication, growth, and cleanliness can provide a new path for China to achieve green economic development [
2].
In recent years, digitization and related technological innovations in China have advanced promptly and taken the leading positions in some fields [
4]. The basic idea of digitization is to make it possible to manufacture products and provide services, innovate in the field of technology, and replace old growth drivers with new ones through the dissemination and processing of elements supported by modern information technology in the context of market globalization and sustainable development [
5]. In addition, the Internet world is gradually shifting from information orientation towards value orientation, and the concept of digitization is gaining importance. Digitization stimulates technological innovation and provides new forms and carriers for social economy and enterprises, offering a broader business scope and economic efficiency to the market [
6].
In the past two decades, global digitalization has shown a rapid growth trend and has become a new engine in the world’s economic recovery [
4]. The pandemic has ravaged the world since 2020, leading to a significant decline in the global economy and social development, but digitalization has alleviated and stabilized the economic downward trend of many countries to some extent. During COVID-19, digitization played a fundamental role in combating the pandemic, supporting public health management, maintaining social order, and achieving the resumption of work and schooling [
7,
8]. Digitalization can energize traditional economic activities and shows wide application and great growth potential with the advantages of network and data space compared to the traditional physical economy that relies on physical space. Digitalization has become one of the most dynamic and innovative economic and social forms and core growth poles of the national economy. It is essentially a special economic form of trading goods and services through virtualization [
5]. Digitization makes access to information easy, makes interaction active, and is very cost-effective [
9]. It plays an essential role in the decision-making, production, marketing, trade, distribution, and service activities of enterprises and is deeply integrated with the specific shape of the real economy [
10]. It has become an important driving force and a new dynamic for green economic development [
11]. It is thus speculated that the green economic development of economic entities in the post-pandemic era will urgently require digitalization.
Previous studies argued that digitalization can have a profound impact on the quality of economic development, which is illustrated in the following aspects: First, digitalization can realize the centralized integration and efficient utilization of production factors. Digitization development can make elements of data through physical carriers to achieve networked sharing, intensive integration, and efficient utilization of technology, labor, capital, and resource elements, which ultimately leads to exponential improvement of economic and social operation efficiency [
12,
13]. Second, digitalization has changed the traditional production and consumption mode. On the one hand, digitalization has realized significant changes in objects of labor, means of production, and labor force, and promoted the exponential growth of productivity [
14,
15]. To be specific, at the level of objects of labor, digitalization has transformed objects of labor from traditional materials to massive data elements; at the level of means of production, digitalization has transformed means of production from machine systems to physical information systems [
16]; and at the level of the labor force, digitalization has transformed the labor force from industrial workers to digital labor [
17]. On the other hand, digitalization can take the economic value network as a link to continuously break the barriers of information asymmetry in the industry, enhance the flow speed of information elements, and give birth to the platform economy, sharing economy, virtual space consumption, artificial intelligence plus, Internet plus, and a series of new economic forms as well as business models to accelerate the advent of the “pro-consumer” era. Digitalization can effectively improve the comprehensive governance capacity of government departments [
18]. China is at the critical stage of starting a new journey of building a great modern socialist country in all respects. As there are many problems such as increasingly acute environmental pollution and resource depletion globally, the decreasing domestic demographic dividend, the increasing downward pressure on the economy, and the middle-income trap [
19], the government is facing unprecedented challenges. While digitization can reveal deep connections that are difficult to show under traditional governance methods by promoting government data sharing and openness and implementing digital governance, which can improve government management effectiveness. As a whole, the existing literature generally agrees that digitization can be a major driver of economic and social transformation and development [
11].
Moreover, digitalization is a dynamic rather than a static form and carrier, so it can lead to more significant benefits and provide a stronger boost to other directions of development [
20]. However, there is a paucity of research that specifically explores the links and impacts of digitalization, technological innovation, and green economic development through quantitative research [
21]. In the new economic and social development stage, the green value of digitalization will certainly be emphasized, and its role in sustainable development will be highlighted. Therefore, how to seize the major development opportunities brought by the new round of technological revolution to provide strong momentum for China’s green economic development through digitalization is one of the crucial issues that needs urgent attention in China’s economic development in the 14th Five-Year Plan period. Thus, exploring the relationship between digitalization, technological innovation, and green economic development and the practical path is not only conducive to seeking innovative directions at the theoretical level but also to making comprehensive plans at the industrial practice level.
Based on the above analysis and the literature review, the entropy method was used in this study to measure digitization, technological innovation, and green economic development for the first time using panel data of 30 Chinese provinces from 2011 to 2019, and a PVAR model was constructed to explore the interaction between digitization and technological innovation as well as green economic development and the degree of influence.
The main marginal contributions of this study are reflected in three aspects: First, digitalization, technological innovation, and green economic development were placed in the same research framework for the first time, and an in-depth econometric analysis of the impact of digitalization and technological innovation on green economic development was conducted to enrich the quantitative research in the field of digitalization, technological innovation, and green economic development. Second, more comprehensive indicators were used to measure the research variable, including green, innovation, coordination, sharing, and openness to thoroughly evaluate the level of green economic development, and the entropy method was used to effectively measure digitalization, technological innovation, and green economic development. Third, dynamic panel models, GMM tests, and impulse response analysis were used to investigate the potential linkage between digitalization, technological innovation, and green economic development. The different promoting effects of digitalization and technological innovation on green economic development and their corresponding characteristics at different development stages are revealed, consequently providing references for the formulation of relevant strategies and industrial practices.
The paper is divided into six sections.
Section 1 introduces the background of the study, the source of the selected topic, the significance, the research questions, and the theoretical contributions.
Section 2 is the review of the relevant literature.
Section 3 contains the mechanism and theoretical analysis, and the research framework is proposed accordingly.
Section 4 presents the methodology used, the variables, and the data selection.
Section 5 elaborates on each process of empirical test and analyzes the results.
Section 6 summarizes the main findings of this study, discusses the conclusions obtained, and makes practical suggestions for digitalization, technological innovation, and green economic development based on the empirical analysis.
2. Literature Review
China’s digital economy will reach CNY 45.5 trillion in 2021, with year-over-year increase of 16.2%, accounting for 39.8% of the GDP in that year [
22]. The position of the digital economy in the national economy has become more solid and supportive. As digitalization becomes the main engine of the development of the digital economy, digital transformation has been an inevitable option for traditional industries to comply with the new situation of the times and economic development. Digitalization or digital transformation is the integration of digital technology into business processes, and digital transformation has a profound impact on value creation, delivery, and acquisition in many industries [
23].
At the industry level, the use of digital technologies provides opportunities to integrate products and services across functional, organizational, and geographic boundaries [
24]. Digital technologies have accelerated the process of industrial transformation and led to significant changes in many industries [
25,
26]. With the help of digital empowerment, companies have an endogenous drive to overturn traditions, thus further driving technological change across industries [
25]. The concept of “Industry 4.0” or “smart factory” [
27] was further introduced to leverage technologies such as cloud computing and the Internet of Everything on a larger scale to optimize each process in the production management chain [
28]. Leveraging big data management allows stakeholders in the supply chain system to share information, facilitate the flow of factors, reduce redundant links, and improve productivity [
29,
30,
31]. Moreover, it limits the potential for abuse. Digitalization has revolutionized the way industry works [
32]. Digital platforms have created a new method of operation for companies and organizations in the “business ecosystem” [
33], leading to the constant iteration and growth of industry value networks [
34].
Digitalization and technological innovation have a complex and dialectical relationship, and the full picture cannot be seen from the industry level alone. Therefore, some scholars have analyzed it from the perspective of internal innovation. In the context of the booming digital economy, the digital transformation of enterprises has become an inevitable trend [
35]. Having a timely, continuous, granular, and complete information structure is the hallmark of the digital transformation of enterprises [
36]. In turn, digital proliferation and embedding are considered opportunities for enterprise innovation and transformation [
37] the powerful penetration capacity of which makes them widely used in production activities and business management activities in various industries and boosts digital transformation and structural optimization of traditional enterprises [
38]. Hoffman’s theorem argues that technological innovation affects changes in industrial structure from changes in production costs, prices, and resource allocation, so technological innovation is one of the key paths to realizing structural transformation of factor endowments and optimization and upgrading of industry structure. Digital technology can complement other production and operation management technologies to reconfigure and integrate various factor resources, including production and organizational methods, triggering production paradigm improvements and industrial linkage effects and promoting structural optimization of production sectors [
39].
When companies carry out internal reforms and digital transformation, they need to rely on new skills to innovate, learn, and adapt to evolving digital technology requirements, and digitalization can change the originally compiled knowledge of production and innovation activities [
14]. The application of digital technology accelerates the clustering and flow of knowledge [
40] and gradually blurs the boundaries of innovation stages, making digital product and service innovation characterized by rapid iterations and upgrades, while it can also improve the dynamic capabilities of innovative processes such as dual capabilities, reorganization capabilities, and digital technology adaptation capabilities of companies [
41]; drive breakthrough innovation; and promote sustainable transformation and development of industries [
42]. Digital technology enables unlimited data replication and sharing and instant interconnection and has unique advantages in reducing data processing costs and transaction costs as well as precisely allocating resources, which can enhance enterprise productivity by reducing expenditure and improving efficiency [
43]. Digital technology also accelerates capital deepening through the accumulation of ICT capital, increases capital support for corporate innovation and R&D investment to boost productivity progress, and ultimately enhances corporate productivity [
43,
44].
From a macro point of view, digitalization is playing an increasingly essential role in many economic entities around the world. Some scholars considered the structure of the digital economy in Asia and found that digital development can lead to business and social change as a means of triggering digitally relevant consumer demand and digital governance [
45], and stimulant policies made by the government together with digital entrepreneurship can improve business processes and enrich the business landscape, both of which ultimately drive growth changes in the digital economy [
46]. Based on panel data from G7 economic entities over the period 1990 to 2017, the study found that in terms of digitalization, firm-funded R&D expenditures, revenue, and financial risk, there was a significant increase in technological innovation in the G7 economies [
47]. Digital global trade in services is part of the digitization of the economy and trade. Scholars analyzed the development trend and influence factors of digital global trade in services based on panel data of digital global trade in services trade for 33 countries from 2005 to 2020, and the results showed that digital infrastructure, human capital, and technological innovation capability have a significant impact on countries’ digital deliverable trade, among which the level of technological innovation has the most significant impact, and the role of digital trade in services that is played in sustainable economic and social development among countries is increasingly prominent [
48]. Digitalization is a crucial condition for the transformation and innovation of financial institutions [
49], while financial institutions accelerate the transformation and development of digital finance through technological innovation, and digital finance improves the competitiveness of national capital markets, reduces the cost of searching and transacting financial resources, thus reducing the cost of financing, which helps to promote the steady and constant transformation of technological innovation into productivity [
50,
51,
52,
53,
54].
Digitalization had fundamentally changed traditional business models and patterns [
55,
56,
57], social linkages, and interactions, consequently increasing the centralization of national markets [
58]. Specifically, economic systems became widely shared, circular, and sustainable. Moreover, technological innovation has significant spillover effects [
59,
60] that significantly empower economic growth, which in turn ensures the country’s green economic development [
61].