Performance effects of digital technology adoption and product & service innovation – A process-industry perspective

European manufacturing companies face increasing pressure to adopt digitalization technologies discussed in the emerging paradigm of Industry 4.0. On the other hand, innovation capabilities both in terms of introducing new products and new services are of outmost importance to gain competitive advantage. Technology adoption and firm innovativeness are often interrelated, but this relation is not well understood, and in particular, the way in which digital technology adoption, product and service innovation, and competitive advantage are related to process industries has not yet been investigated. This paper develops and operationalizes a conceptual framework for product and service innovation, thereby incorporating digital technology adoption. Through an exploratory study, using quantitative data from the European Manufacturing Survey (EMS)-2015, we analyze data from 747 cases in the process industries from D, NL, A, CH, and DK. Our main findings show that companies with higher levels of digital technology implementation (breadth and depth) can introduce more radical product and service innovations. Companies with both radical innovations and service innovation make significantly greater use of their implemented technologies’ potential. Radical product innovation also yields higher returns on sales, but contrary to our assumptions, service innovation in process industries does not. We find that, in the low-tech sectors, digital technologies are used to generate product and services innovations which then translate into higher performance. In contrast, in the high-tech sectors, digital technologies have a direct impact on performance and are thus rather accustomed to realizing the efficiency gains not primarily used for innovation.