Does Enterprise Digitalization Improve the Quantity and Quality of Innovation?Based on Dynamic Capability Perspective
Digitization is becoming a crucial breakthrough for enterprise innovation activities.The question of whether and how enterprise digitization influences the quantity and quality of innovation has become an urgent research issue.While previous studies have explored the relationship between enterprise digitization and innovation output,consensus has not been reached.Research in the field of technological change suggests that the digital transformation of enterprises not only expands the boundaries of innovation and improves the combination of innovative elements,but also reduces the cost,diffi-culty,and risk of innovation.Thus,digitization provides limitless possibilities for enterprise innovation.However,organiza-tional theory research indicates that enterprise digitization alters the underlying logic of innovation activities,involving sys-temic changes such as resetting concepts,updating conventions,reengineering processes,and adjusting architectures.Conse-quently,digitization may create an insurmountable gap between existing organizational capabilities,leading to a decline rath-er than an increase in innovation output.In light of these challenges,a more systematic study of how enterprise digitaliza-tion affects innovation output and the underlying mechanisms of the complex relationship between digitalization and innova-tion output has strong theoretical value and practical significance.To address the competitive interpretations in existing studies,this study,based on the perspective of dynamic capability theory,explores the impact of enterprise digitization on the quantity and quality of innovation.Furthermore,it examines the mediating role of dynamic capabilities.Taking A-share listed companies from 2010 to 2020 as research sample,the study uses the proportion of digital intangible assets of sample companies and the frequency of digital keywords in annual reports to measure the degree of digitalization of companies.The study uses the natural logarithm of the number of invention patent applications of sample companies over the years to represent the quantity of innovations,and based on the knowledge breadth algorithm,the Herfindahl index of the invention patent IPC classification number at the major group level is used to represent the innovation quality,thereby conducting an empirical test on the relationship between enterprise digitalization and innovation output.The findings reveal a significant inverted U-shaped impact of enterprise digitization on both the quantity and quality of innovation.This conclusion holds after undergoing endogeneity tests using two-stage least squares method,Heckman two-stage models,and sys-GMM models.Mechanism analysis using a deviation-corrected non-parametric percentile Boot-strap method suggests that innovation capabilities,absorptive capacities,and adaptive capacities play a mediating role be-tween enterprise digitization and innovation output.Further analysis indicates that network embedding and organizational flexibility enhance the positive impact of enterprise digitization on innovation quantity and quality.Based on the research findings presented above,the digitalization of firms exerts a dual effect on innovation outcomes,depending on the level of digitalization.When digitalization is maintained within a reasonable range,firms can effectively leverage digital technologies to encode unstructured data,utilize these technologies as design tools,dismantle internal departmental silos,and reduce various transaction costs,thereby facilitating the shift from experience-driven to digital-ly-driven innovation.However,when the level of digitalization surpasses a certain threshold,further investment in digital elements leads to diminishing marginal returns,and advanced digital infrastructure may misalign with existing organiza-tional routines,thus inhibiting both the quantity and quality of innovation.This insight highlights that during digital transfor-mation,firms need to ensure that the density of digital technologies aligns with the organizational system,avoiding the pit-fall of blindly expanding digital investments at the expense of their resource and capability base,which may lead to the"digitalization paradox."In particular,digitalization impacts an organization's absorptive capacity to sense complex and dy-namic environments,its adaptive capacity to acquire and integrate internal and external resources,and its innovative capaci-ty to develop new products and enter new markets.Thus,firms should cultivate dynamic capabilities that align with digital requirements during digitalization efforts,and maintain the density of digital technology within a range that corresponds to the organization's dynamic capabilities.
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