The mechanism of digital transformation impact on innovation performance
Pro Research Analysisby 
Searched over 200M research papers
Consensus Meter
The Mechanism of Digital Transformation Impact on Innovation Performance
Introduction to Digital Transformation and Innovation Performance
Digital transformation (DT) is revolutionizing how businesses operate, innovate, and compete. It involves integrating digital technologies into all areas of a business, fundamentally changing how companies deliver value to customers and how they innovate. This article explores the mechanisms through which digital transformation impacts innovation performance, drawing insights from multiple research studies.
Digital Technology-Business Alignment and Innovation
One critical mechanism through which digital transformation enhances innovation performance is the alignment of digital technology with business strategies. Studies have shown that when digital technologies are well-aligned with business goals, they significantly boost sustainable innovation performance. This alignment helps firms better utilize digital tools to innovate processes, products, and business models, especially in environments with lower uncertainty.
Role of R&D Capabilities in Manufacturing
In the manufacturing sector, digital transformation directly promotes both process and product innovation performance. This effect is mediated by the firm's research and development (R&D) capabilities. Exploratory and exploitative R&D capabilities play crucial roles in this process, albeit through different mechanisms. Exploratory R&D focuses on new knowledge and technologies, while exploitative R&D enhances existing capabilities. Both types of R&D are essential for leveraging digital transformation to boost innovation performance.
Improving Innovation Quality through Internal Controls and Analyst Attention
Digital transformation also improves the quality of enterprise innovation by enhancing internal control mechanisms and increasing analyst attention. These improvements lead to better decision-making and resource allocation, which in turn enhance innovation outcomes. This mechanism is particularly effective in non-state-owned enterprises and those located in more developed regions .
Dynamic Capabilities as a Mediator
Dynamic capabilities, which refer to a firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments, are another key mediator in the relationship between digital transformation and innovation performance. Digital transformation enhances these dynamic capabilities, enabling firms to better respond to market changes and innovate more effectively.
Business Model Innovation in SMEs
For small and medium-sized enterprises (SMEs), digital transformation necessitates rethinking and innovating business models. SMEs that allocate more resources to business model experimentation and engage in strategic implementation practices tend to perform better. This is because digital transformation provides new opportunities for business model innovation, which is crucial for maintaining competitiveness and driving innovation.
Regional and Sectoral Differences
The impact of digital transformation on innovation performance can vary significantly across different regions and sectors. For instance, in China, the positive effects of digital transformation on innovation performance are more pronounced in the eastern regions and in sectors with higher technological content. This suggests that the benefits of digital transformation are not uniformly distributed and are influenced by regional and sectoral characteristics .
Financial Constraints and Corporate Governance
Bank digital transformation also plays a role in enhancing the innovation performance of borrowing enterprises. By alleviating financial constraints and improving corporate governance, banks' digital transformation efforts can indirectly boost the innovation output of firms. This highlights the interconnected nature of digital transformation across different sectors and its broader economic implications.
Conclusion
Digital transformation significantly impacts innovation performance through various mechanisms, including digital technology-business alignment, R&D capabilities, internal controls, dynamic capabilities, and business model innovation. The effects are influenced by regional and sectoral differences, and financial and governance improvements also play a role. Understanding these mechanisms can help firms strategically leverage digital transformation to enhance their innovation performance and maintain competitive advantage.
Sources and full results
Most relevant research papers on this topic
How does digital transformation affect sustainable innovation performance? The pivotal roles of digital technology‐business alignment and environmental uncertainty
Can Digital Transformation Promote Innovation Performance in Manufacturing Enterprises? The Mediating Role of R&D Capability
Can digital transformation improve the quality of enterprise innovation in China?
Enterprise Digital Transformation, Dynamic Capabilities and Innovation Performance
Digitalization, business models, and SMEs: How do business model innovation practices improve performance of digitalizing SMEs?
The Impact of Enterprise Digital Transformation on Innovation Performance
The impact of digital transformation on corporate innovation: Roles of analyst coverage and internal control
Digital transformation as a springboard for product, process and business model innovation
Bank Digital Transformation and Enterprise Innovation—Evidence from China
Digital Transformation and Manufacturing Firm Performance: Evidence from China
Try another search
uniqueness of human language in linguistics
What are the fundamental principles of algebra and calculus?
The safety and long-term effects of low-dose radiation exposure from medical imaging.
The impact of space debris on satellite operations and space exploration.
What are effective ways to manage the health of aging parents?
what are stars made of