Firm information disclosure environment and R&D investment: Evidence from Internet penetration.

Guided by the conviction that "Clear waters and green mountains are as good as mountains of gold and silver", China highly values sustainable economic and social development through innovation and Internet technology. Regression analysis is performed to examine the impact of corporate information disclosure environment proxied by the Internet penetration rate on innovation. Leveraging from the city-level Internet penetration rates data in China from 2003 to 2017, this study gets the following findings: (1) Firms headquartered in cities with high Internet penetration rates tend to be more innovative, i.e. they invest more in research and development. (2) This result is supported by several robustness checks, such as alternative measures of key variables, alternative empirical specifications, and tests to mitigate identification concerns. (3) "financing constraint" and "tolerance of innovation failure" are two channels that influence firms' innovative endeavors. (4) Additional tests show that Internet penetration rates facilitate a firm's output efficiency of innovation input, total factor productivity, and human capital environment for innovation. The above conclusions not only enrich the relevant literature on the influencing factors of corporate innovation from the perspective of the firm information disclosure environment but also provide an important reference for further understanding the positive role of macro technology development on social and economic development.