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EMAC 2024 Annual


The Impact of Digital Technology and Innovation Capabilities on Competitive Performance in Times of Institutional Voids: Evidence from China
(A2024-119922)

Published: May 28, 2024

AUTHORS

Ruby Lee, Florida State University; Xinlin Tang, Florida State University

ABSTRACT

Institutional voids, referring to the absence or inadequacy of formal institutions and regulations, are common in emerging economies. This is especially noticeable when uniform rules and regulations are not consistently applied. The question arises: do firms with robust digital technology and innovation capabilities significantly impact their competitive performance in such environments? To address this question, we propose a two-stage model that integrates the literature on innovation and digital technology with the institution-based view. Initially, we present a full mediation model to illustrate the pathway connecting digital technology, innovation capabilities, and competitive performance. To gain a more nuanced understanding of this process, we differentiate digital technology into two categories: internal-focused and external-focused. We theorize these as drivers for two distinct types of innovation capabilities, namely, product and process innovation capabilities. Subsequently, we investigate how dysfunctional competition, which often results from institutional voids, influences our mediation model. Empirical data collected from 241 Chinese firms confirm that both product and process innovation capabilities serve as full mediators between digital technology and competitive performance. However, when accounting for dysfunctional competition, the strengths of these mediation effects vary. The study's additional findings are discussed, along with their implications for both theory and practice.