Digital technology usage, strategic flexibility, and business model innovation in traditional manufacturing firms: The moderating role of the institutional environment

This paper investigates how digital technology can be used to facilitate business model innovation in manufacturing firms. Building on organizational adaptation theory and institutional theory, this study examines the impact of digital technology usage on business model innovation, the mediating role of strategic flexibility, and the moderating role of the institutional environment, including policy support and regulatory turbulence. The results based on a sample of 236 traditional manufacturing firms show that there is a significant association between digital technology usage and business model innovation in which strategic flexibility plays a mediating role. The institutional environment has a dual role in this association: policy support strengthens the impact of digital technology usage on strategic flexibility, but regulatory turbulence weakens it. The findings enrich the existing research on the mechanisms and boundary conditions of digitally driven business model innovation and support manufacturing business model innovation in the digital context.