| Abstract |
Innovation and quality improvement in China's main sectors drive its digital economy. This study examines the economic effects of innovation investment in certain businesses, specifically cash and R&D spending increases. We use the panel threshold regression model on 478 listed businesses in digital economy key industries from 2013 to 2022. Our study uses R&D investment intensity and excess cash holdings as threshold factors and found interesting results. As the threshold variable, R&D investment intensity has a three-threshold effect, demonstrating a W-shaped association with firm performance. The dynamics of R&D investment change from negative to positive and vice versa, highlighting its complexity. Second, using excess cash holding levels as the threshold variable shows a range that positively affects R&D intensity and current-period enterprise performance, with a greater effect on future performance. However, much currency dampens this link. Regional and industry-specific tests reveal threshold effect variations. As it progresses, the study matches knowledge economy demands. This research illuminates the complex relationship between R&D investment, excess cash holdings, and firm success in China's digital economy, aiding strategic decision-making. The recommended enterprise and government interventions support innovation and sustainable development in the digital core industries in a knowledge-driven economy. |