The Role of Green Innovation on Firm Value Moderated by Digital Transformation in the Basic Industry and Chemical Sector Listed on the IDX

Abstract

This study examines the effect of green product innovation (GPI) and green process innovation (GCI) on firm value, and tests the moderating role of digital transformation (DT) in these relationships among basic industry and chemical firms listed on the Indonesia Stock Exchange (IDX). Using panel data from 33 firms during 2019–2023 (165 observations) selected through purposive sampling, green innovation is measured via manual content analysis (κ = 0.884) while digital transformation is measured through dictionary-based content analysis of seven strategic digital technology categories. Panel data regression with the Common Effect Model is used after all classical assumptions are met. The results show that GPI (β = −0.0079; p < 0.01) and GCI (β = −0.0080; p < 0.01) have a significant negative direct effect on firm value. However, digital transformation positively and significantly moderates the effects of GPI (β = 0.0013; p < 0.01) and GCI (β = 0.0008; p < 0.05) on firm value, exhibiting a sign-reversing moderation effect at sufficient levels of digital transformation. These findings contribute to Dynamic Capabilities Theory and Signaling Theory, and provide practical implications that integrating green innovation with digital transformation is a critical strategy for firm value creation in the Indonesian basic industry and chemical sector.