Unlocking Innovation Potential: The Non-Linear Effect of Digital Transformation on Firms' Innovation Breadth

In an era where digital transformation fundamentally reconfigures innovation ecosystems, understanding its impact on firms' innovation breadth is strategically significant for balancing the dual imperatives of strategic differentiation and operational legitimization. Based on optimal distinctiveness theory, this study, using empirical data from Chinese A-share listed firms (2013-2022), reveals an inverted U-shaped relationship: moderate digital transformation maximizes innovation breadth, whereas excessive implementation leads to diminishing returns. The curvilinear pattern is particularly pronounced in non-state-owned firms, high-tech firms, and firms with low-to-medium market positions. Mechanically, digital transformation impacts innovation breadth through two concurrent channels: R&D intensity (internal capability development) and analyst attention (external pressure response). Crucially, knowledge spillover serves as a boundary condition that attenuates both the direct effect of digital transformation on innovation breadth and the indirect effect mediated through R&D intensity, indicating a moderated mediating pathway. These findings contribute to the literature on digital innovation and offer practical guidance for firms on strategically optimizing their digitalization levels.