Factors Drive Enterprise Digital Innovation: History
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Qi Song
,
Xiaohong Chen
,
Hao Gu

The concept of digital innovation was first introduced by Youngjin Yoo in 2010, who thought digital innovation is an innovative process of combining digital and physical components to produce new products, services, and business models. Subsequently, it aroused widespread concern in academic circles. In terms of the connotation and measurement of digital innovation, some studies based on the consequential theory, proposed that digital innovation refers to the innovative results produced by applying digital technology in the innovation process, including the use of digital technology to bring new products, improving production processes, changing organizational models, creating and changing business models, etc. Based on process theory, some scholars proposed that digital innovation is the combination of digital technologies such as information, computing, communication, and connection used in the innovation process. There are also studies based on the theory of synthesis, pointing out that digital innovation should combine the application of digital technology and the results, including both the efficiency in innovation process and the generation of innovation results.

  • digital innovation intention
  • digital innovation performance
  • TOE framework

1. Introduction

A new round of scientific and technological revolution centered on digital technologies such as big data and cloud computing is accelerating its widespread application, triggering the reshaping of the global innovation economic system [1]. As a green, innovative, and sustainable high-quality economic paradigm [2], the digital economy has become a key theme for China’s economic growth. According to the “Digital China Development Report (2022)” released by the State Internet Information Office of China, the scale of China’s digital economy reached CNY 50.2 trillion in 2022, ranked second in the world in terms of total volume, and its proportion in GDP has increased to 41.5%, China’s digital industrialization and industrial digital development have achieved remarkable achievements. At the same time, according to the “Global Digital Economy Development Index Report” released by the Institute of Finance and Economics of the Chinese Academy of Social Sciences, although China’s digital economy has significant advantages in the digital market and digital infrastructure, ranking 2nd and 3rd in the world respectively, there is still a certain gap in digital technology and digital governance, ranking 15th and 41st in the world respectively, lacking development advantages. Compared with other advanced digital economy countries, the core competitiveness and the independent innovation ability of key core technologies of China’s digital industry still have a significant gap. Therefore, to accelerate the construction of digital China, it is more important to promote continuous innovation in the digital technology industry. As important micro-subjects of economic development, enterprises are explorers, organizers, and leaders of digital innovation, and play an important role in breaking through technological bottlenecks and tackling scientific and technological problems. In the wave of digital development, those companies that have seized the opportunities of digital technology have achieved curve overtaking, and companies that struggle to adapt to the development of digital transformation have been eliminated by the times. Therefore, how to promote enterprises to actively participate in digital innovation and improve digital innovation performance is of great significance for improving the international competitiveness and sustainable development capabilities of China’s digital industry and promoting the high-quality development of China’s digital economy.
The concept of digital innovation was first introduced by Yoo in 2010 [3], who thought digital innovation is an innovative process of combining digital and physical components to produce new products, services, and business models. Subsequently, it aroused widespread concern in academic circles. In terms of the connotation and measurement of digital innovation, some studies based on output theory proposed that digital innovation refers to the innovative results produced by applying digital technology in the innovation process, including the use of digital technology to bring new products, improving production processes, changing organizational models, creating and changing business models, etc. [4]. Based on process theory, some scholars proposed that digital innovation is the combination of digital technologies such as information, computing, communication, and connection used in the innovation process [1]. There are also studies based on the theory of synthesis, pointing out that digital innovation should combine the application of digital technology and the results, including both the efficiency in the innovation process and the generation of innovation results [5].
In terms of research on the driving factors of digital innovation, there are studies on resource, organizational, and environmental factors. Some studies have showed that digital innovation requires advanced human capital, human capital can be integrated and iterated with technological and organizational resources to accelerate digital innovation [6]; knowledge management can also promote digital process innovation [7][8]. Regarding organizational factors, some scholars have found that digital innovation is affected by organizational strategy and organizational change [9], digital innovation is driven by many organizational factors such as opportunity search, business intelligence, organizational change, and organizational adaptation [10]. For example, Beatrice et al. [11] used the cases of four multinational companies operating in different industries to explore how existing companies can adjust their business models to cope with digital innovation. Other scholars have further proved that the capabilities of young entrepreneurs during economic turmoil have different impacts on digital innovation in micro-, small-, and medium-sized enterprises [12]. Regarding environmental factors, some studies have found that government financial support and training can enhance enterprises’ understanding of digital innovation [13], while human capital such as economic level and population size have little effect on the development of digital industries, and regions with poor economic foundations can use information infrastructure construction to promote industrial development [14].
In terms of the role of digital innovation, due to the reprogrammability of digital technologies, which can be continuously embedded into the innovation process to increase the fault tolerance and unpredictability of products, firms can make continuous adjustments to the innovation strategies in a dynamic innovation environment [15][16]. Based on this, some scholars pointed out that digital innovation can enhance the ability of enterprises to perceive the threat of potential competitors and the direction of industrial change, strengthen the continuous monitoring and reconnaissance of changes in the market environment [17], and create prerequisites for enterprises to grasp the window of opportunity of digitization and realize pioneering development [18]. Some scholars proposed that enterprises with strong digital innovation capabilities generally have strong development resilience [19]. Enterprises can use intelligent data to build resource protection walls to help enterprises adapt to changes in the face of external uncertainties and corporate crises, and even build new competitive advantages, and use this as a lever to achieve disruptive development [20][21]. In addition, some studies have found that companies that actively participate in digital innovation can more actively undertake social responsibilities, improve social reputation [22], and build organizational culture, risk quality management, and other organizational capabilities necessary for sustainable development [23].
From the above research, it can be found that digital innovation is a core and effective way to achieve digital empowerment and promote enterprises to enhance their competitiveness and achieve sustainable development [24]. Scholars have conducted various studies on digital innovation, but there are still the following deficiencies: first, the current measurement of enterprise digital innovation is mostly based on result theory, considering that digital innovation is a new product or new income produced by the enterprise, ignoring the consideration of the initiative and enthusiasm of enterprises participating in digital innovation from the perspective of process theory; second, although the existing literature has initially explored the impact of resources, organizational, and environmental factors on digital innovation in enterprises, few studies have integrated the internal and external factors into a holistic and systematic framework; third, most of the existing research focused on the influence and effect of a single factor or single dimension on enterprise digital innovation and used regression analysis to confirm the net effect of a single variable, neglecting the comprehensive consideration of the combination and superposition effect of multiple factors, and failing to reveal the group effect of multi-factor interaction on enterprise digital innovation.

2. How Technological, Organizational, and Environmental Factors Drive Enterprise Digital Innovation

The TOE framework was initially applied to the research on factors affecting enterprise technology adoption, and the factors were summarized into three dimensions: technology, organization, and environment [25]. Among them, technological factors refer to characteristics related to technological innovation, such as technological advantages, technological compatibility, technological cost, and technological complexity, etc. [25][26]; organizational factors include organizational scale, organizational type, and organizational support [27]; and environmental factors refer to characteristics of the organization’s external environment, including political environment, economic environment, social environment, etc. [28]. As the framework is applied to different research scenarios, the framework connotations are continuously enriched. For example, Wang analyzed the impact of enterprise technology preparation, organizational preparation, and environmental preparation on the performance of green innovation based on the TOE framework [26]; Lei combined innovation environment to explore the impact of different types of digital technology and organizational characteristics on enterprise service diversification [27]; Lexutt used the TOE framework to investigate how technology transfer and geographical location affect regional economic growth [29]. Under the penetration of digital technology, enterprise innovation not only requires organizational resources as the basis for digital technology application but also requires strong support from the external environment, such as regional and industry influences, so as to release innovation vitality in the synergy of internal and external factors [30].

2.1. Technological Dimension

The TOE framework first focuses on the impact of the technological characteristics of the enterprise itself on the development and application of digital technology [31]. The dynamic and self-growth features of digital technology have increased the uncertainty of digital innovation. New technologies will not only bring new products and solutions but also may bring all-new changes or disruptions to industry, placing higher demands on the speed and quality of digital innovation [32]. As one form of internal resource allocation in enterprises, R&D investment represents the level of intention to digitally innovate and is an important condition for enterprises to start digital innovation [33]. The Chinese Internet company Alibaba’s total R&D investment in 2022 has exceeded CNY 120 billion. In the past three years, 60% of its patents have been concentrated in digital innovation fields such as artificial intelligence and cloud computing. Its Alibaba Cloud, which relies on its self-developed Feitian operating system, has the world’s leading market share and has achieved market share growth for six consecutive years. It can be seen that R&D investment can accelerate digital innovation output by helping enterprises to build digital resource systems.
In addition, the rapid development of emerging technologies such as artificial intelligence, cloud computing, big data, and blockchain, which are characterized by digitization and intelligence, requires more high-level technological talents. As the core of the enterprise’s digital innovation capability, high level talents have strong digital technology learning ability can continuously focus on the connection between corporate resources, capabilities, and product markets, actively respond to dynamic changes in the company and the market, and help accelerate technology development and market expansion [34]. At the same time, in the process of digital innovation, high-level talents can better understand the user needs, actively conduct critical evaluation and improvement of product design and functions, and finally promote product landing.

2.2. Organizational Dimension

The TOE framework also pays attention to the influence of organizational structural characteristics and organizational strategy on the development of digital innovation [35]. Studies have shown that the size of the organization affects the digital innovation of enterprises [36]. Compared with medium-sized businesses (SMEs), large enterprises have more innovative resource advantages, stronger risk resistance, and easier to achieve cross-border operations. Dell’s IdeaStorm, Haier’s crowdsourcing platform, and Xiaomi Community all take advantage of the strong organizational scale to gather heterogeneous innovation groups, thus achieving benefit sharing and risk sharing of digital innovation. However, some scholars have also found that SMEs are more flexible in their organization and could seize technological opportunities promptly to achieve breakthroughs in the rapid iteration of digital technologies [37].
In addition, in the process of digital innovation, as the lead of the organization, the composition of the top management team also has a significant impact on the deployment of the company’s overall digital strategy and the development of innovation actions [38]. First of all, the greater the difference in the professional background of the executive team, the more channels and ways the organization can obtain information, the more quickly the company can perceive the changes in the external environment, and it is easier to identify innovation opportunities and potential risks to adjust the digital innovation strategy on time [39]; second, a more heterogeneous executive team has different knowledge backgrounds, decision-making styles and professional perspectives, which make the whole team more creative and inclusive, meaning it is easier to form an active digital innovation atmosphere and open up innovation boundaries through collective brainstorming [40]. 

2.3. Environmental Dimension

The TOE framework also focuses on the impact of the dynamically evolving external environment on digital innovation [41]. As digital technology triggers a “digital butterfly” in various economic sectors, more and more industries are recognizing the importance of digital innovation. Generally speaking, industries with faster development have a more advanced understanding of the R&D and application of digital technology. Based on the isomorphic effect, the improvement of the digitalization level in the industry promotes the formation of new competition rules, the survival of the fittest, and the elimination of the inferior [42]. To obtain quality suppliers and customers and increase the innovation efficiency of enterprises, enterprises need to have digital resources and capabilities that match the development of enterprises in the same industry, thus stimulating the motivation and innovative energy of digital innovation.

In addition, the advancement of digital technology systems and digital industries is inextricably linked to local digital infrastructure and policy support[13]. In recent years, all parts of China have continued to make efforts in the field of the digital economy, extensively building digital infrastructure and promoting the local digital economy development. The government attaches great importance to regional digital innovation activities and carries out the regional layout of digital innovation through the master plan of urban services and urban governance[41]. Usually, the better the construction of regional digital infrastructure and the more improved the local digital policy governance system, the better it is to promote the digital innovation activities of enterprises. Therefore, this paper investigates the impact of environmental dimension on enterprise digital innovation from two factors: industrial development speed and regional digitization level.

2.4 Model Construction

The above analysis reveals that each of the six antecedent conditions from technology, organization, and environment has an important impact on the digital innovation activities of enterprises. However, from the perspective of configuration, the influence of various conditions on enterprise digital innovation is not independent of each other, but synergistically exerts their effects through linkage and matching. In this process, the application of digital technology becomes the basic medium and transformer of digital innovation[42,43]. However, digital technology must be closely integrated with traditional innovation resources such as capital, equipment, and talents to fully exert its innovation-enabling role[44]. R&D investment and high level talents constitute the resource base of digital innovation, which to a large extent determines the feasibility and adaptability of an organization's application of digital technology, and can further affect the organization's specific technological requirements. Organizational size and top management team heterogeneity affect the allocation of corporate organizational resources and the interaction effect, they also affect the realization of innovation results under certain technological characteristics. At the same time, under the interaction of internal and external factors, enterprises need to continuously absorb digital innovation resources from the environment, identify, organize, and apply effective information, dynamically adjust innovation behavior, facilitate resource integration, and then promote digital innovation activities.

In sum, this research adopts the TOE framework as the theoretical basis to establish an analytical framework for the influencing factors of enterprise digital innovation and chooses six influencing factors from the three levels of technology, organization, and environment, including R&D investment, high level talents, organizational size, and top management team heterogeneity, industrial development speed, and regional digitalization level, discusses how multiple factors of technology, organization, and environment affect the digital innovation activities of enterprises through mutual linkage and concurrent synergistic effects. The theoretical framework is shown in Figure 1.

Sustainability 15 12248 g001

Figure 1. Theoretical framework.

This entry is adapted from the peer-reviewed paper 10.3390/su151612248

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