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Top1. Introduction
The institutional theory posits that an effective system can foster economic growth and development, with the business environment serving as a tangible manifestation of this system (Struckell et al., 2022; R. Wang et al., 2021). The business environment encompasses the policies, regulations, and socio-economic factors within a country or region that directly impact enterprise operations, such as government policies, legal regulations, market competition, social culture, and infrastructure (Chang & Chen, 2021; Do et al., 2022). According to institutional theory, a robust legal system is crucial for safeguarding property rights and contractual agreements (Brousseau et al., 2011; Y. Yang et al., 2021). Additionally, a sound system should support market competition while preventing monopolies and undue intervention, thereby stimulating innovation and competitiveness among enterprises (Jiang et al., 2023; Pasinetti, 2021; Wang et al.,2022). Ultimately, a strong system can promote entrepreneurship and innovation, augment market efficiency, and improve overall business competitiveness.
The business environment has been profoundly affected by the advent of digital transformation (Mann et al., 2022; Y. Zhang et al., 2023; Liu et al.,2022). Firstly, it enables enhanced information exchange and collaboration, which expands the market size while reducing barriers to entry and streamlining innovation and entrepreneurship (Rosado-Cubero et al., 2023; L. Yu et al., 2023). Secondly, digital technologies can automate numerous internal processes, which in turn reduces cycle times, cuts costs, improves production efficiency and enhances product quality (H. Zhang et al., 2023). Finally, digital transformation has resulted in the emergence of new business models and opportunities, offering companies novel avenues for growth and development (Ancillai et al., 2023; Marcon et al., 2022). In the current digital era, enterprise competitiveness is increasingly predicated on intangible assets such as technology, data, and knowledge, thus transforming the traditional business environment (Şimşek et al., 2022). Consequently, digital transformation renders a multifaceted impact on the business environment, encompassing both beneficial effects and disruptions that challenge conventional business environment models (Wani et al., 2021; Liu et al.,2022).
The impact of the business environment on enterprise innovation can be seen in numerous ways (Ghosh et al., 2021; Kraus et al., 2022). Firstly, a positive business environment provides enterprises with sufficient innovation resources, which directly influences the effectiveness of their innovation implementation (Li et al., 2023, 2023). Secondly, a favorable business environment adequately protects the intellectual property (IP) rights of enterprises and supports their technological research and development (Zhao et al., 2022; Ding et al.,2022). This protection enables enterprises to engage more actively in technological innovation (Z. Chen, 2022; Scherrer & Perrig, 2021). Thirdly, government policies and services can promote innovation investment and practices by facilitating innovative activities among enterprises (Böttcher et al., 2022; Y. Jia et al., 2023; Ozen & Ozturk-Kose, 2023). Fourth, regions or countries with a robust business environment have broader and more diversified market demand, providing enterprises with greater opportunities to innovate in products and technologies (K. H. Choi & Kwon, 2023; Karami et al., 2022). Fifthly, a competitive business environment incentivizes enterprises to constantly improve their innovation strength and competitiveness, thereby promoting technological progress and upgrading the entire industry (Amouri et al., 2021; Hoskins & Carson, 2022; Wang et al.,2023). Thus, the business environment has a significant impact on the innovation activities and outcomes of enterprises. A positive business environment can provide enterprises with improved conditions for innovation and development, fostering greater competitive advantages in the marketplace.