The Role of Digital Technology and Digital Innovation Towards Firm Performance in a Digital Economy: In Pakistan

Abstract

This study investigates the impact of digital technologies and digital innovation on firm performance within Pakistan's Information, Communication, and Technology (ICT) sector. Employing a quantitative approach, the researchers collected cross-sectional data from employees working in ICT companies, analyzing 323 valid responses. The findings, based on structural equation modeling (SEM), reveal that digital capability (DC), digital orientation (DO), and digital transformation (DT) significantly and positively influence digital innovation (DI) and firm performance (FP). Additionally, a strong positive relationship exists between DI and FP. The study highlights that DI mediates the relationships between DC, DO, and DT with FP. By adopting new digital technologies and enhancing existing DCs, companies can become innovation leaders and improve FP. These insights are instrumental for industries aiming to leverage the growing digitalization trend. Policymakers can also utilize these findings to advocate for increased funding to support digital upskilling in small and medium-sized enterprises (SMEs). Moreover, this study enriches the literature on the role of digital technologies in enhancing firm performance, confirming the significance of DC, DO, and DT in fostering DI and FP in a developing economy like Pakistan.

Keywords: Digital capability, Digital orientation, Digital transformation, Digital innovation,     Firm performance