The Role of Company Sector on the Impact of Digital Orientation Strategy and Digital Capabilities Mediated by Company Readiness on Digital Innovation
DOI:
https://doi.org/10.47747/fmiic.v1i1.2137Abstract
This study aims to analyze the effects of Strategic Digital Orientation and Dynamic Digital Capabilities on Digital Innovation, mediated by Company Readiness, in both service and non-service companies.This research employs a quantitative research method with descriptive and confirmatory characteristics. This study uses Structural Equation Modeling (SEM) with PLS-SEM multigroup analysis (PLS-MGA) to process data. This study's findings reveal a positive and significant influence of Strategic Digital Orientation and Digital Capabilities on both Company Readiness, and Digital Innovation. Contrary to expectations, Company Readiness did not significantly impact Digital Innovation, nor did it significantly mediate the relationship between Strategic Digital Orientation and Digital Innovation or between Digital Capabilities and Digital Innovation. Interestingly, the research uncovered a significant difference between service companies and non-service companies regarding the influence of Digital Capabilities on Digital Innovation, underscoring the sector-specific dynamics of digital innovation strategies. The influence of Digital Capabilities on Digital Innovation was found to be stronger in service companies, highlighting the critical role of digital capabilities in enhancing innovation within sectors directly interfacing with customers and reliant on digital platforms for service delivery. This study presents certain limitations. Firstly, it does not incorporate external variables, variations in the scale, and restricts its sample solely to Indonesian Financial Directors Association members.
References
Al-Ansari, Y., Pervan, S., & Xu, J. (2013). Innovation and business performance of SMEs: The case of Dubai. In Education, Business and Society: Contemporary Middle Eastern Issues (Vol. 6, Issue 3, pp. 162–180). https://doi.org/10.1108/EBS-04-2013-0012
Almeida, F., Duarte Santos, J., & Augusto Monteiro, J. (2020). The Challenges and Opportunities in the Digitalization of Companies in a Post-COVID-19 World. IEEE Engineering Management Review, 48(3), 97–103. https://doi.org/10.1109/EMR.2020.3013206
Annarelli, A., Battistella, C., Nonino, F., Parida, V., & Pessot, E. (2021). Literature review on digitalization capabilities: Co-citation analysis of antecedents, conceptualization and consequences. Technological Forecasting and Social Change, 166, 120635. https://doi.org/10.1016/J.TECHFORE.2021.120635
Arachchige, C. M. H. (2021). Cascade Use In Circular Economy Business Models In The Textile And Fashion Industry – A Dynamic Capabilities Perspective. University of Boras.
Ardito, L., Raby, S., Albino, V., & Bertoldi, B. (2021). The duality of digital and environmental orientations in the context of SMEs: Implications for innovation performance. Journal of Business Research, 123, 44–56. https://doi.org/10.1016/j.jbusres.2020.09.022
Barrett, P. (2007). Structural equation modelling: Adjudging model fit. Personality and Individual Differences, 42(5), 815–824. https://doi.org/10.1016/j.paid.2006.09.018
Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., & Venkatraman, N. (2013). Digital business strategy: Toward a next generation of insights. Management Information Systems Quarterly, 37(2), 471-482.
Borowski, P. F. (2021). Innovation strategy on the example of companies using bamboo. Journal of Innovation and Entrepreneurship, 10(1), 1–17. https://doi.org/10.1186/S13731-020-00144-2/TABLES/5
Bughin, J., & Van Zeebroeck, N. (n.d.). The Best Response to Digital Disruption (Vol. 58, Issue 4). http://mitsmr.com/2oFlYgE
Casula, M., Rangarajan, N., & Shields, P. (2021). The potential of working hypotheses for deductive exploratory research. Quality & Quantity, 55(5), 1703–1725. https://doi.org/10.1007/s11135-020-01072-9
Cenamor, J., Parida, V., & Wincent, J. (2019). How entrepreneurial SMEs compete through digital platforms: The roles of digital platform capability, network capability and ambidexterity. Journal of Business Research, 100, 196–206. https://doi.org/10.1016/j.jbusres.2019.03.035
Geissbauer, R., Vedso, J., & Schrauf, S. (2016). Industry 4.0: Building the digital enterprise. www.pwc.com/industry40
Gobble, M. A. M. (2018). Digitalization, Digitization, and Innovation. Research Technology Management, 61(4), 56–59. https://doi.org/10.1080/08956308.2018.1471280
Guo, L., & Xu, L. (2021). The Effects of Digital Transformation on Firm Performance:Evidence from China’s Manufacturing Sector. Sustainability, 13(22), 1284.
Gupta, S., Qian, X., Bhushan, B., & Luo, Z. (2019). Role of cloud ERP and big data on firm performance: a dynamic capability view theory perspective. Management Decision, 57(8), 1857–1882. https://doi.org/10.1108/MD-06-2018-0633
Hai, T. N., Van, Q. N., & Tuyet, M. N. T. (2021). Digital Transformation: Opportunities and Challenges for Leaders in the Emerging Countries in Response to Covid-19 Pandemic. Emerging Science Journal, 5(Special Issue), 21–35. https://doi.org/http://dx.doi.org/10.28991/esj-2021-SPER-03
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2019). Multivariate data analysis (8th ed.). UK Cengage Learning.
Hooper, D., Coughlan, J., & Mullen, M. (2008). Structural Equation Modeling: Guidelines for Determining Model Fit. Electronic Journal of Business Research Methods, 6, 53–60.
Jun, W., Nasir, M. H., Yousaf, Z., Khattak, A., Yasir, M., Javed, A., & Shirazi, S. H. (2021). Innovation performance in digital economy: does digital platform capability, improvisation capability and organizational readiness really matter? European Journal of Innovation Management. https://doi.org/10.1108/EJIM-10-2020-0422
Junior, J. C. F., Maçada, A. C., & Brinkhues, R. (2017). Digital Capabilities as Key to Digital Business Performance. AMCIS 2017 Proceedings.
Kenny, D. A., & McCoach, D. B. (2003). Effect of the Number of Variables on Measures of Fit in Structural Equation Modeling. Structural Equation Modeling, 10(3), 333–351. https://doi.org/10.1207/S15328007SEM1003_1
Khin, S., & Ho, T. C. F. (2019). Digital technology, digital capability and organizational performance: A mediating role of digital innovation. International Journal of Innovation Science, 11(2), 177–195. https://doi.org/10.1108/IJIS-08-2018-0083
Kindermann, B., Beutel, S., Garcia de Lomana, G., Strese, S., Bendig, D., & Brettel, M. (2021). Digital orientation: Conceptualization and operationalization of a new strategic orientation. European Management Journal, 39(5), 645–657. https://doi.org/10.1016/J.EMJ.2020.10.009
Kline, R. B. (2005). Principles and practice of structural equation modeling. Guilford Press.
Laforet, S. (2011). A framework of organisational innovation and outcomes in SMEs. International Journal of Entrepreneurial Behaviour and Research, 17(4), 380–408. https://doi.org/10.1108/13552551111139638
Lestari, E. R., Thoyib, A., Zain, D., & Santoso, I. (2013). Innovation as a Mediating Variable of the Relationship between Technological Capability and Firm Performance : A Conceptual Approach. International Journal of Business and Behavioral Sciences, 3(12), 41–50.
Levallet, N., & Chan, Y. (2022). Uncovering a new form of digitally-enabled agility: an improvisational perspective. European Journal of Information Systems. https://doi.org/10.1080/0960085X.2022.2035262
Liu, X., Huang, Q., Dou, J., & Zhao, X. (2017). The impact of informal social interaction on innovation capability in the context of buyer-supplier dyads. Journal of Business Research, 78, 314–322. https://doi.org/10.1016/j.jbusres.2016.12.027
Lokuge, S., Sedera, D., Grover, V., & Dongming, X. (2019). Organizational readiness for digital innovation: Development and empirical calibration of a construct. Information and Management, 56(3), 445–461. https://doi.org/10.1016/j.im.2018.09.001
Lopes de Sousa Jabbour, A. B., Jabbour, C. J. C., Godinho Filho, M., & Roubaud, D. (2018). Industry 4.0 and the circular economy: a proposed research agenda and original roadmap for sustainable operations. Annals of Operations Research, 270(1–2), 273–286. https://doi.org/10.1007/S10479-018-2772-8
Lucas, J., Melo, N., Porpino De Castro, L., Soares Da Silva, J., & Fabiana Gohr, C. (2022). Readiness Factors And Dynamic Capabilities For Sustainability-Oriented Innovation. Future Studies Research Journal, 1–30. https://doi.org/10.24023/FutureJournal/2175-5825/2022.v15i1.674
Magni, M., Palmi, P., & Salvemini, S. (2018). Under pressure! Team innovative climate and individual attitudes in shaping individual improvisation. European Management Journal, 36(4), 474–484. https://doi.org/10.1016/j.emj.2017.07.009
Matt, C., Hess, T., & Benlian, A. (2015). Digital Transformation Strategies. In Business and Information Systems Engineering (Vol. 57, Issue 5, pp. 339–343). Gabler Verlag. https://doi.org/10.1007/s12599-015-0401-5
McIntosh, C. N. (2007). Rethinking fit assessment in structural equation modelling: A commentary and elaboration on Barrett (2007). Personality and Individual Differences, 42(5), 859–867. https://doi.org/10.1016/j.paid.2006.09.020
Mohamud, M., & Sarpong, D. (2016). Dynamic capabilities: towards an organizing framework. Journal of Strategy and Management, 9(4), 511–526. https://doi.org/10.1108/JSMA-11-2015-0088/FULL/XML
Nambisan, S. (2017). Digital entrepreneurship: Toward a digital technology perspective of entrepreneurship. Entrepreneurship Theory and Practice, 41(6), 1029-1055.
Nambisan, S., Lyytinen, K., Majchrzak, A., & Song, M. (2017). Digital Innovation Management: Reinventing Innovation Management Research in a Digital World. MIS Quarterly, 41(1), 223–238. https://doi.org/10.25300/MISQ/2017/41:1.03
Nambisan, S., Wright, M., & Feldman, M. (2019). The digital transformation of innovation and entrepreneurship: Progress, challenges and key themes. Research Policy, 48(8). https://doi.org/10.1016/j.respol.2019.03.018
Ojala, A., Evers, N., & Rialp, A. (2018). Extending the international new venture phenomenon to digital platform providers: A longitudinal case study. Journal of World Business, 53(5), 725–739. https://doi.org/10.1016/j.jwb.2018.05.001
Panda, S., & Rath, S. K. (2021). Information technology capability, knowledge management capability, and organizational agility: The role of environmental factors. Journal of Management & Organization, 27(1), 148–174. https://doi.org/10.1017/JMO.2018.9
Quinton, S., Canhoto, A., Molinillo, S., Pera, R., & Budhathoki, T. (2018). Conceptualising a digital orientation: antecedents of supporting SME performance in the digital economy. Journal of Strategic Marketing, 26(5), 427–439. https://doi.org/10.1080/0965254X.2016.1258004
Rupeika-Apoga, R., Petrovska, K., & Bule, L. (2022). The Effect of Digital Orientation and Digital Capability on Digital Transformation of SMEs during the COVID-19 Pandemic. Journal of Theoretical and Applied Electronic Commerce Research, 17(2), 669–685. https://doi.org/10.3390/jtaer17020035
Szukits, Á. (2022). The illusion of data-driven decision making – The mediating effect of digital orientation and controllers’ added value in explaining organizational implications of advanced analytics. Journal of Management Control, 33(3), 403–446. https://doi.org/10.1007/s00187-022-00343-w
Teece, D. J. (2018). Profiting from innovation in the digital economy: Enabling technologies, standards, and licensing models in the wireless world. Research Policy, 47(8), 1367–1387. https://doi.org/10.1016/j.respol.2017.01.015
Tiengtavaj, S., Phimonsathienand, T., & Fongsuwan, W. (2017). Ensuring Competitive Advantage Through Innovationcapability And Clustering In The Thai Automotiveparts Molding Industry: A Sem Approach Mongkut’s Institute Of Technology. Management and Production Engineering Review, 8(1), 89–100. https://doi.org/10.1515/mper-2017-0010
Tolstoy, D., Nordman, E. R., & Vu, U. (2022). The indirect effect of online marketing capabilities on the international performance of e-commerce SMEs. International Business Review, 31(3). https://doi.org/10.1016/j.ibusrev.2021.101946
Torres, A. P., Marshall, M. I., & Sydnor, S. (2019). Does social capital pay off? The case of small business resilience after Hurricane Katrina. Journal of Contingencies and Crisis Management, 27(2), 168–181. https://doi.org/10.1111/1468-5973.12248
Valmohammadi, C. (2017). Customer relationship management: Innovation and performance. International Journal of Innovation Science, 9(4), 374–395. https://doi.org/10.1108/IJIS-02-2017-0011
Vial, G. (2019). Understanding digital transformation: A review and a research agenda. The Journal of Strategic Information Systems, 28(2), 118–144. https://doi.org/https://doi.org/10.1016/j.jsis.2019.01.003
Weill, P., & Woerner, S. L. (2015). Thriving in an Increasingly Digital Ecosystem. MIT Sloan Management Review. 56. MITSloan Management Review, 56(4).
Westerman, G., Calméjane, C., Bonnet, D., Ferraris, P., & McAfee, A. (2011). The Digital Advantage: How digital leaders outperform their peers in every industry.
Yang, C., Huang, Q., Li, Z., Liu, K., & Hu, F. (2017). Big Data and cloud computing: innovation opportunities and challenges. In International Journal of Digital Earth (Vol. 10, Issue 1, pp. 13–53). Taylor and Francis Ltd. https://doi.org/10.1080/17538947.2016.1239771
Yeow, A., Soh, C., & Hansen, R. (2018). Aligning with new digital strategy: A dynamic capabilities approach. Journal of Strategic Information Systems, 27(1), 43–58. https://doi.org/10.1016/j.jsis.2017.09.001
Yu, Y., Huo, B., & Zhang, Z. (2021). Impact of information technology on supply chain integration and company performance: evidence from cross-border e-commerce companies in China. Journal of Enterprise Information Management, 34(1), 460–489. https://doi.org/10.1108/JEIM-03-2020-0101/FULL/XML
Zawislak, P. A., Alves, A. C., Tello-Gamarra, J., Barbieux, D., & Reichert, F. M. (2013). Influences of the Internal Capabilities of Firms on their Innovation Performance: A Case Study Investigation in Brazil. In International Journal of Management (Vol. 30, Issue 1).
Zhang, H., Lu, Y., Gupta, S., & Zhao, L. (2014). What motivates customers to participate in social commerce? the impact of technological environments and virtual customer experiences. Information and Management, 51(8), 1017–1030. https://doi.org/10.1016/j.im.2014.07.005
Zhen, Z., Yousaf, Z., Radulescu, M., & Yasir, M. (2021). Nexus of digital organizational culture, capabilities, organizational readiness, and innovation: Investigation of smes operating in the digital economy. Sustainability (Switzerland), 13(2), 1–15. https://doi.org/10.3390/su13020720
Zhou, K. Z., & Wu, F. (2010). Technological capability, strategic flexibility, and product innovation. Strategic Management Journal, 31(5), 547–561. https://doi.org/10.1002/smj.830
