Abstract: Based on the data of segmented patents and digital transformation of A-share listed companies from 2011 to 2021, the quantity and the quality of authorized patents are used to measure the level of groundbreaking innovation of enterprises, and the impact of digital transformation on groundbreaking innovation and its internal mechanism is empirically tested through the instrumental variable method and the time-varying DID (Difference-in-Differences) model. The study reveals that the digital transformation significantly promotes the level of groundbreaking innovation of enterprises, and the effect is more obvious in private enterprises, capital-intensive enterprises, enterprises in southern and coastal areas, high-tech industries and high-competitive industries. The mechanism analysis shows that the enhancement of groundbreaking innovation capability of enterprises is mainly caused by the optimization of the structure of labor force, the increase in R&D intensity and total factor productivity brought about by enterprises’ digital transformation. Further, it is found that smart city pilots promote the digital transformation and the improvement of groundbreaking innovation level of enterprises. Based on the quality of patents, it is found that there is a significant “U-shaped” relationship between digital transformation and groundbreaking innovation quality of enterprises. The above conclusions provide important empirical evidence and policy enlightenment for enterprises to accelerate the digital transformation and obtain groundbreaking innovation.

Key words: digital transformation, groundbreaking innovation, smart city, patent quality, time-varying DID model