Digital technological innovation is catalyzing a new wave of factor and structural changes, presenting micro-firms with a significant opportunity to reshape their competitive advantages. This study integrates the Chinese context with text mining techniques to construct firm-level indicators of perceived competitive pressure and investigates the impact of such pressure on digital technological innovation. The findings reveal several key insights. Firstly, firms’ perception of competitive pressure is positively related to the level of digital technology innovation. Executive equity incentives further strengthen this positive relationship, while compensation incentives have a weakening effect. Secondly, under heightened competitive pressure, firms enhance their digital technological innovation by improving internal control and digital transformation. Thirdly, the relationship between perceived competitive pressure and digital technological innovation is more pronounced in firms with higher levels of trade credit financing, high-tech firms, and firms with executives who have a professional background in digitalization.