The Intricate Connections between Digital Strategy, Absorptive Capacity, Digital Technology Use, and Digital Innovation

Although digital innovation has attracted much scholarly attention, little is known about the nuanced connections between digital strategy, absorptive capability, digital technology use, and digital innovation. Knowledge of these connections is essential for firms aiming to innovate successfully in the digital age. This study aims to bridge this gap by integrating perspectives from strategic management and absorptive capacity, proposing that a firm’s digital innovation stems from intricate interplays among digital strategy, absorptive capacity, and digital technology use. This research employs partial least squares structural equation modeling with data from a survey of 250 Chinese firm managers. The findings reveal a positive association between a firm’s digital strategy and its digital innovation, both directly and indirectly. The indirect relationship unfolds through a complex process, sequentially mediated by absorptive capacity and digital technology use, as well as simultaneously mediated by both factors. Notably, this research uncovers a curvilinear relationship between digital technology use and digital innovation. This research makes a valuable contribution to the existing literature on digital innovation by underscoring the importance of comprehending these intricate interrelationships. Furthermore, it provides actionable managerial insights for firms aiming to enhance their digital innovation initiatives.