Linking manufacturing digitalization and technological Innovation: The mediating role of dynamic capabilities

Amid the expanding digital economy and the progression of Industry 4.0 initiatives, both industry professionals and academic researchers are increasingly focused on unraveling the mechanisms by which manufacturing digitalization drives technological innovation. Build upon the resource-based view and dynamic capability theory, this study develops a theoretical framework and proposes research hypotheses to investigate how manufacturing digitalization and dynamic capabilities influence technological innovation, with particular attention to product and process innovation. Analyzing survey data from 276 manufacturing firms located in the first national-level pilot cities for digital transformation in China, structural equation modeling results reveal that: (1) digitalization within manufacturing firms can significantly promote both product and process innovation; (2) dynamic capabilities play a mediating role in linking manufacturing digitalization with technological innovation. Specifically, dynamic capabilities partially mediate the relationship between manufacturing digitalization and process innovation, and serve as a full mediator in its impact on product innovation. These findings provide theoretical insights and practical implications, helping manufacturing firms better recognize the strategic value of digitalization and dynamic capabilities in enhancing technological innovation through digital transformation. • Digitalization enhances both product and process innovation in manufacturing firms. • Dynamic capabilities mediate the link between digitalization and innovation outcomes. • Full mediation found for product innovation; partial mediation for process innovation. • Findings are based on data from 276 Chinese firms in national digital pilot cities. • Study reveals dynamic capabilities are essential for digitalization-driven innovation.