Digitization and radical innovation: the serial mediation effect of absorptive capacity

Purpose Radical innovation involves significant technological advances that have a critical impact on both firm growth and society development. Therefore, there is a growing need to understand how to achieve radical innovation. While previous studies have examined the direct effect of digitization on firm innovation, there is still limited knowledge of how digitization affects radical innovation. This paper aims to contribute to further exploring the underlying mechanism of how digitization affects radical innovation by incorporating the serial mediation effect of absorptive capacity. Design/methodology/approach This paper collected data from Chinese-listed manufacturing firms from 2015 to 2021 and analyzed the data using bootstrap analysis. Findings The research results show that digitization has a positive impact on radical innovation. Furthermore, digitization can influence radical innovation through potential absorptive capacity and realized absorptive capacity, and the mediation effect of potential absorptive capacity and realized absorptive capacity can occur sequentially. These research results are validated by a range of robustness tests. Originality/value This paper contributes to the literature on digitization and radical innovation by validating a model that links digitization through absorptive capacity to radical innovation. This model helps to explain the relationship between digitization and radical innovation, which has previously been a topic of debate. This paper also contributes to the absorptive capacity literature by unpacking the asymmetric roles of the potential absorptive capacity and the realized absorptive capacity. This paper also provides valuable implications for practices.