In the context of increasingly fierce global scientific and technological competition, radical innovation plays a pivotal role in fostering new productive forces and serves as a key engine for China’s modernization process. As a major reform in judicial enforcement, the introduction of online judicial auctions in China provides a distinctive institutional setting to examine how digital technologies can reshape the external environment for firm-level innovation.

This paper considers the staggered rollout of online judicial auctions across Chinese cities as a quasi-natural experiment and manually collects information on the timing at which courts in each city first conducted judicial auctions on the Alibaba Judicial Auction Platform. It combines these data with firm-level patent information to measure radical innovation and uses a staggered DID model to examine the impact of local online judicial auctions on corporate radical innovation. The benchmark regression results indicate that online judicial auctions significantly increase radical innovation. Mechanism testing reveals that, at the firm level, online judicial auctions enhance creditor protection, improve internal and external financing capabilities, and alleviate managerial myopia. At the institutional environment level, online judicial auctions reduce local judicial protectionism and improve the transparency and fairness of judicial enforcement procedures. Further analysis indicates that this positive effect is more pronounced in regions with weaker judicial institutions, in non-state-owned enterprises, and in enterprises with weaker innovation foundations, highlighting their compensatory role in alleviating institutional deficiencies.

This paper contributes to the literature in three main ways: First, from the perspective of “digitalization of judicial enforcement”, it extends the literature on the determinants of radical innovation and provides novel micro-level evidence on how judicial enforcement institutions shape high-risk innovative activities. Second, it is the first to systematically document the causal effect of online judicial auctions on corporate radical innovation, thereby broadening the analytical scope of research on judicial enforcement reforms. Thirdly, by placing judicial digitalization within the context of the digital economy and the modernization of national governance, it deepens the understanding of how digital technologies enhance institutional enforcement capacity and affect corporate strategic decision-making, enriching the theoretical linkage between digital empowerment, judicial enforcement, and innovation-driven development.