The Interplay of Digitalization and Innovation on Internationalization: Empirical Evidence from Traditional Chinese Medicine Firms

This paper examines the relationships between digitalization, innovation, and internationalization, focusing on their interaction. It also explores the moderating role of China’s “Dual Circulation Policy.” Evidence of Traditional Chinese Medicine (TCM) firms show digitalization boosts internationalization but hinders innovation. The interaction negatively impacts internationalization, though firms in more open provinces, with higher Inward Foreign Direct Investment (IFDI) and Intellectual Property Rights (IPR), mitigate this effect. The study contributes to digital globalization theory and the new Ownership, Location, and Internalization (OLI) framework, offering insights for policymakers and firms in traditional industries like TCM to enhance internationalization through digitalization transformation.