Can enterprises navigate through the digitalization bottleneck? The curvilinear relationship between digital technology application and innovation performance under environmental uncertainty

Abstract

Literature on the innovation performance outcomes of digital technology application has been ambiguous. There is a growing call from academics to examine not only the positive but also the negative impacts of digital technology application. Additionally, many studies largely ignore the role of environmental uncertainty. Based on dynamic capability theory and organizational inertia theory and using data from Chinese listed enterprises from 2007 to 2020, this study examines how the benefits and costs of digital technology application at different levels (low, medium and high) interact to form a complex curvilinear relationship with innovation performance and the moderating role of environmental uncertainty. The findings of this study indicate that the relationship between digital technology application and innovation performance is curvilinear, with a positive slope at low levels of digital technology application, a weaker slope at medium levels of digital technology application and a stronger positive slope at high levels of digital technology application. Environmental uncertainty has different moderating effects on the relationship between digital technology application and innovation performance at different levels of digital technology application. This study provides theoretical insights into the controversy regarding the outcomes of digital technology application by revealing a complex curvilinear relationship and identifies a critical boundary condition by integrating environmental uncertainty into the cost-benefit framework of digital technology application.