When digital meets physical: how does digital-real integration drive corporate open innovation?

This study aims to explore how digital-real integration drives corporate open innovation and its underlying mechanisms. Based on data from Chinese A-share listed companies between 2012 and 2024, using a two-way fixed effects model, this study finds that the digital-real integration significantly promotes corporate open innovation. Mechanism analysis indicates that corporate internal dynamic capabilities play a significant mediating role in this process. Specifically, digital-real integration enhances corporate open innovation by improving absorptive and innovative abilities, while the mediating role of adaptability is not significant. Furthermore, the external institutional environment exerts a significant moderating effect. The positive effect can be accentuated in a well-developed formal institutional environment, while it will be weakened when the informal institutional environment is more stringent and there is a clear substitution effect between them. This study reveals the capability transmission paths and institutional boundaries of digital-real integration in driving open innovation, helping enterprises optimise their innovation ecosystem.