Government Digitalization: A Catalyst for Innovation Across Economies

ABSTRACT Motivated by the rapid advancement of digital technologies and their transformative impact on governance, this study investigates how government digitalization influences national innovation capability. As countries increasingly integrate digital tools to streamline public administration and enhance online service delivery, understanding its implications on innovation becomes crucial. This study employed panel data from 72 countries to empirically explore the relationship between government digitalization and national innovation capability. First, a fixed‐effect model revealed a positive impact of government digitalization on national innovation capability, and this positive effect withstood robustness checks. Subsequently, three fixed‐effect models with interaction terms examined the mechanisms underlying this effect, finding that government digitalization can enhance national innovation capability by improving ease of doing business, curbing corruption, and enhancing the legal environment. Furthermore, heterogeneity analysis examined and confirmed the moderating effects of telecommunications infrastructure, residents' digital skills, natural resource abundance, financial development, industrial upgrading, and ruling party ideology on the relationship between government digitalization and national innovation capability. Finally, a panel threshold regression model revealed a non‐linear impact of government digitalization on national innovation capability, which varied according to economic development levels. The findings of this study provide new empirical evidence for the rationality of governments' digital transformation.

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