Purpose Firms closely observe and respond to the digital innovation activities of their peers to gain advantages and mitigate risks. Drawing on dynamic competition theory and institutional theory, this study examines the existence of peer effects in digital innovation (DI). Additionally, it explores the underlying decision-making references of these peer effects through the motivation-opportunity-ability (MOA) framework. Design/methodology/approach Using Sentence-BERT to identify digital patents, this study employs a linear panel regression model with fixed effects to analyze 7,909 samples from Chinese listed firms. To ensure robustness, the study further conducts placebo tests, propensity score matching and instrumental variable methods. Findings The results indicate that a focal firm’s DI level is significantly influenced by the DI levels of its peers, confirming the existence of peer effects. Furthermore, a top management team with a digital background and regional intellectual property protection serves as critical decision-making reference points. The effect of a firm's status on DI follows an inverted U-shaped pattern, initially strengthening but later diminishing. There is an inverted U-shaped relationship between peer effects in DI and the focal firm's sustainable development. Originality/value This study advances the understanding of the mechanism underlying peer effects in DI. It expands the antecedents of DI and clarifies the boundary conditions of peer effects. Moreover, the study contributes to the MOA framework by applying it in a novel context – peer-influenced DI at the organizational level – thereby expanding its theoretical application. Finally, this study provides new empirical insights into the relationship between DI and firm sustainable development.
L. et al. (Tue,) studied this question.