Impact of digital transformation on innovation performance: theories and practices with reference to the case of firms in the ICT sector in Saudi Arabia

Abstract

With the ongoing development of information technologies, the era of networks is gradually emerging and having a significant impact on all industries. This development compels businesses to adapt their business models to keep pace with innovation, enhance their competitive advantage, and promote healthy development. While existing research has primarily focused on the economic and environmental performance of digital transformation, few studies have directly explored the relationship between digital transformation and innovation. From the perspective of innovation factors, our study investigated the relationship between digital transformation and innovation using data from companies in the Information and Communication Technology (ICT) sector between (2012-2023). The findings are as follows: firstly, the digital transformation of companies, measured through textual analysis methods, effectively promotes innovation. Secondly, knowledge flow, technical personnel, research and development investments, and innovation awareness play crucial mediating roles. Thirdly, digital transformation has a more substantial impact on the innovation of non-high-tech companies. The results of this article alleviate concerns related to digital transformation, particularly in developing countries such as Saudi Arabia. They provide valuable insights and evidence to support the adoption of Industry 4.0 and foster sustainable innovation.