Regional Digitalization, Digital Innovation Capabilities, and Manufacturing Sector Innovation

Abstract

The continued penetration of digital technologies poses challenges to conventional innovation theories, particularly in explaining how digital environments shape firms’ innovation strategies in emerging markets. By integrating digital affordance theory, this study examines the influence of regional digitalization on firms’ innovation trajectories. Using data from China’s manufacturing sector (2013–2022) and a multilevel mixed-effects model, the results indicate that higher levels of regional digitalization significantly drive firms toward disruptive innovation while reducing firms’ emphasis on incremental innovation, with digital innovation capabilities mediate such effects. In addition, the degree of marketization and industry market turbulence moderate these relationships, making firms more inclined to incremental innovation. Conversely, technological turbulence strengthens the link between regional digitalization and disruptive innovation. These findings contribute to digital innovation theory by revealing the geospatial contingency of digital affordances, highlighting how regional digitalization and firm-level capabilities co-determine firms’ strategic responses to the tension between disruptive and incremental innovation.