Authors: Ioanna Kastelli, Petros Dimas, Dimitris Stamopoulos, Aggelos Tsakanikas
Title: Linking digital and absorptive capacity to innovation performance: evidence from the Greek manufacturing
Abstract
Digital technologies are considered as factors that accelerate the pace of innovation and increase the firm’s innovation performance. However, few studies have investigated whether this belief is conditioned by other elements that play overarching role for innovation. Furthermore, firms increasingly rely on external knowledge sources to expand their internal knowledge base for the development of innovations. In this context, absorptive capacity can be considered as an essential organisational capability to embrace adoption of digital technologies and enhance their positive effect on innovation performance.
This paper builds on this discussion and studies the contribution of digital capacity on innovation performance, proposing the mediating role of absorptive capacity in the context of digital transformation.
Innovation activity is a complex process relying among other things on prior knowledge and intensity of efforts or commitment in problem solving and on interaction with external sources of knowledge. As presented in our theoretical discussion, the mediating effect of absorptive capacity on innovation has been extensively studied in the literature. On the other hand, when coming to the discussion on enablers and constraints of digital transformation, a few studies show that adopting digital technologies do not necessarily result directly to innovation. We expand this discussion and study the contribution of digital capacity on innovation performance, proposing the mediating role of absorptive capacity in the context of digital transformation.
The paper uses evidence from an extensive Greek survey in 1014 manufacturing firms and analyses the complex relationships underlying the role of digital transformation to innovation. We contribute to the better understanding of the underlying mechanisms through which firms can leverage their digital capacity to accelerate innovation. The empirical analysis concerns the specific case of the Greek manufacturing. Our results highlight the strong positive direct contribution of absorptive capacity and to a lesser extent of digital capacity to innovation performance. They also support the important mediating role of absorptive capacity in enhancing the positive effects of digitalization. The mediating role of absorptive capacity points to the fact that digital technologies cannot stand alone as sources of competitive advantage. Other elements interfere and their absence could jeopardize the process of digitalization and the positive effects from digital transformation. Internal R&D and interactive efforts to expand the firm’s knowledge base and innovation capabilities are critical contributors to their innovation performance and can enhance returns on investment to highly sophisticated technologies. It is then highlighted that digital capacity is not an unquestionable asset for innovation performance. As it appears in the context of the Greek manufacturing firms, given their low performance in different innovation and digitalization indicators, it is not straightforward that an overall industrial strategy boosting digitalization will result to the required improvement of innovation performance in the Greek business ecosystem. In this context, policy aiming to boost digitalisation of Greek firms should consider the need for improvement in other aspects of the business ecosystem that relate to innovation, such as R&D efforts, training, interaction among actors and building of communities of practice to efficiently address the challenge of digital transformation.
