Understanding cognitive differences in the effect of digitalization on ambidextrous innovation: Moderating role of industrial knowledge base

Abstract

A number of existing researches agree that digitalization would facility firms to launch ambidextrous innovations. Digitalization is not only about technological change, but more importantly, the reshaping of the firms’ knowledge structure and routines to percept and integrate knowledge. Thus, some researchers suggest that whether firms could benefit from digitalization varies across firms and industries, since innovation in different firms and industries relies on differentiated level of cognitive and reasoning of knowledge. However, existing studies mainly focus on exploring the firm-level differences, and leave the industry-level difference underdeveloped. In response, this study integrates knowledge-based view to examine how a firm’s digitalization affects ambidextrous innovation, and further explore the conjoint effect of industrial knowledge bases—the knowledge base of the industry the firm is located in—on the relationship between firm digitalization level and ambidextrous innovation. This study uses Python to conduct text mining of firms’ annual reports, and obtains data of 394 listed companies from the year 2014 to 2020. The empirical results show that digitalization level has positive effect on both exploratory innovation and exploitative innovation, and the effect on exploitative innovation is stronger than on exploratory innovation. Moreover, the moderating effect of industrial knowledge base is significant on “digitalization–exploratory innovation” but not on “digitalization–exploitative innovation” relationship. By doing so, this study refines the research on the relationship between digitalization and firm innovation, and confirms that the usage of digitalization may lead to achieve an ambidextrous situation. This study also provides a theoretical basis for industrial differences of the effectiveness of digitalization, suggesting firms considering industrial characteristics to implement digitalization-assisted innovation practices.