The effects of information technology capability and knowledge base on digital innovation: the moderating role of institutional environments

Abstract

Based on the knowledge-based view, this study investigates how firms' information technology (IT) capability broadens and deepens their knowledge base, which consequently improves digital innovation. By further drawing on the institutional theory perspective, this study examines how the relationships between IT capability and knowledge base are moderated by the institutional environments in which the firm operates. This paper uses 170 samples of Chinese firms and an empirical test conducted by the authors following a hierarchical moderated regression analysis. The results find that IT capability positively affects knowledge breadth and knowledge depth, which consequently improves digital innovation. Furthermore, the study reveals the negative moderating effects of enforcement inefficiency on IT capability–knowledge breadth relationship, and the negative moderating effects of government support on IT capability–knowledge depth relationship. This research is one of the earliest attempts to explore the impact of the institutional environment of emerging economies on IT capability. It also clarifies the impact of knowledge breadth and knowledge depth on digital innovation.