Achieving Digital Transformation: The Effect of Open Innovation Strategies at Different Stages of SME Development in an Emerging Market

Abstract

As small and medium-sized enterprises (SMEs) struggle to adopt digital technologies, open innovation could provide a solution by utilizing external and internal technological resources across organizational boundaries to help SMEs overcome digital transformation deficits. This research investigates the direct effect of two open innovation strategies, namely, external technology acquisition and external technology exploitation, on digital transformation of emerging-market SMEs. It also examines how firm age and size moderate such effect. Analyses of 320 dual-source (one general manager and one production manager), time-lagged data from 160 Thai electronics SMEs suggest that external technology acquisition and external technology exploitation positively affect digital transformation. Moreover, as SMEs age, the positive effect of external technology acquisition and external technology exploitation on digital transformation becomes weaker and stronger, respectively. Furthermore, the positive effect of external technology exploitation on digital transformation appears to be stronger for larger SMEs than for smaller ones. The findings suggest that, to achieve digital transformation, early-stage SMEs’ managers should practice external technology acquisition; once SMEs mature, they should engage more in external technology exploitation. Likewise, as firm size does not moderate the effect of external technology acquisition on digital transformation, even small SMEs can attain digital transformation by effectively acquiring external technology.