The Impact of twin transition on firms' business performance

Abstract

Driven by the critical global demand for twin transition, the simultaneous pursuit of decarbonization and digitalization, the objective of this study is to empirically examine the impact of the joint adoption of eco-innovation and digital technologies on sales performance in the Korean manufacturing sector and to identify the implications of this strategic response to both market pressures and environmental challenges. The analysis, which uses data from the Korea Innovation Survey 2022 and employs propensity score matching techniques, shows significant positive effects on sales for firms that adopt both eco-innovation and digital technology. Specifically, the average treatment effect on the treated, in terms of increases in sales for firms that adopted both an eco- innovation and a new digital technology, was estimated at 46.1% and 38.6%. The study also explores the impact of combining eco-innovation with specific digital technologies. The results show significant sales increases for firms that combined eco-innovation with big data, cloud computing, or 5G telecommunications. These findings highlight the strategic importance of the twin transition, suggesting that firms that integrate eco-innovation with such technologies can enhance their business performance. This research underscores the need for supportive policies and incentives that promote sustainable growth and a competitive advantage by supporting the joint adoption of eco-innovations and new digital technologies.