The enabling effects of digital technology on the quality of firm development: Insights and implications

Firms are the fundamental units driving the development of regional systems, and their enhancement in overall strength determines the effectiveness of industrial collaborative innovation networks, serving as a crucial support for the high-quality development of urban agglomerations. In the digital era, how firms can improve their overall strength to enhance their supporting role in the construction of regional industrial networks is a matter of significant interest. Therefore, as a new driving force for firm development, exploring the impact of digital technology on firm development quality is of great importance. From the perspective of the enabling effects of digital technology, this paper takes A-share listed firms within China's five major urban agglomerations as the research subjects, utilizing panel data from 2012 to 2022. Through theoretical analysis and empirical testing using various econometric methods—including the fixed effects model, two-stage least squares regression model, and mediation effect model—the study investigates the impact of digital technology application on firm development quality and its underlying mechanisms. This study finds that the application of digital technology significantly enhances the quality of firm development, and as the level of digital technology application deepens, firms' development continues to improve. From the perspective of enabling factors, digital technology application can promote the improvement of firm development quality by activating innovation vitality, alleviating financing constraints, and reducing human resource management costs. The heterogeneity analysis results reveal that the impact of digital technology application on firm development quality exhibits various heterogeneous characteristics, including differences in urban agglomeration, ownership structure, and firm size. •With the deepening of digital technology application, firm development quality continues to enhance.•The transmission mechanisms involve innovation vitality, financing constraints, and human resource management costs.•There is heterogeneity in the effect, which includes variations in urban agglomeration, ownership structure, and firm size.