Deciphering the code of climate policy in facilitating cross-boundary digital innovation for traditional enterprises: novel insights from patient capital

This study examines how climate policies (CPs) facilitate traditional enterprises’ cross-boundary digital innovation (CBDI), with a particular focus on the interplay between capital structure and governance mechanisms. The empirical strategy employs a multi-period difference-in-differences approach for causal identification, complemented by double machine learning for robust inference and fuzzy-set Qualitative Comparative Analysis ( f s Q C A ) to elucidate complex causal configurations. This integrated approach enables us to uncover the underlying mechanisms through which CP shapes innovation trajectories. The empirical results demonstrate that CP promotes digital innovation, particularly under optimised governance and capital conditions. Strategic equity enhances policy effectiveness through governance embedding, whereas relational capital exhibits a suppression–facilitation trajectory due to financial stability considerations. The f s Q C A reveals two distinct innovation pathways that we label the Governance-Infused Capital Path and the Scale-Driven Capital Transformation Path, both of which underscore the synergistic roles of capital governance and firm scale in fostering innovation. Heterogeneity analysis reveals that densely populated regions and smaller firms exhibit stronger responsiveness to CP. The primary theoretical contribution of this study is delineating the dynamic correlations between CP, capital attributes and innovation outcomes and advancing knowledge on the influence of patient capital as a conduit for sustainable digital transformation. The findings provide actionable insights for policy design and open promising avenues for future inquiry at the nexus of climate governance and digital innovation.