Innovation effects of Industry 4.0 and inbound open innovation: individual and synergistic effects

This study aims to investigate individual and joint effects of digitalization and inbound open innovation (OI) on technological (product and process) innovations in German firms. In particular, two specific forms of digitalization are considered – artificial intelligence (AI) and big data analytics (BDA), as well as the search breadth as a measure of inbound OI. To answer this research question, an econometric analysis is conducted on a sample of Germany firms using the Mannheim Innovation Panel dataset from the wave conducted in 2019 and covering the period 2016–2018. Moreover, the study reports results for the manufacturing and service sectors separately. This sectoral analysis sheds light on any potential differences in the innovation effects of digitalization and OI practices. Our empirical findings are heterogeneous and show that, overall, AI positively impacts product innovation, while BDA increases the likelihood of process innovation. Moreover, AI and the breadth of knowledge search do not yield synergistic innovation effects, while BDA weakens the positive impact of search breadth on process innovation. Based on empirical findings, we discuss theoretical, managerial and policy implications. This study contributes to the literature by examining the influence of digitalization and inbound OI on technological, product and process innovations. In addition, this study examines the mediating effect that digitalization and inbound OI can exert on technological innovation in German firms. The full sample is divided into manufacturing and service sectors to disentangle potentially heterogeneous effects of inbound OI and digitalization on innovation performance.