ABSTRACT:
Extant research on how digital innovation impacts firm performance is equivocal. To address this critical lack of epistemological clarity, our study seeks to disentangle the juxtaposed roles of digital innovation as both an outcome and a process. When conceived as an outcome, digital innovation directly impacts firm performance, although previous studies report inconsistent results. When considered as a process, digital innovation either enables or inhibits the leveraging of research and development (R&D) investments, a distinctive recognition that has not been substantiated with empirical evidence. Our research ushers in the two constructs of juxtaposed roles in digital innovation, develops a scale for their measurement, and empirically confirms their separability at the firm level. The research model is tested through a comprehensive empirical analysis involving 332 Chinese firms. This is the first study to discover that, as an outcome, there is an inverted U-shaped relationship between digital innovation and firm performance, while as a process, digital innovation leverages R&D investments depending on environmental uncertainty. More important, the juxtaposed roles of digital innovation are complementary and substitutive in shaping firm performance. Furthermore, we find that digital innovation can function in terms of flexibility, agility, resilience, and risk under different technological and market uncertainties. These findings remain robust across various empirical validations.
Key words and phrases: Digital innovation, juxtaposed roles, technological uncertainty, market uncertainty, firm performance