CHAPTER 2 LITERATURE REVIEW AND THEORETICAL FRAMEWORK
2.2 Related Concepts
2.2.1 Definition of Digitalization
According to Gartner’s glossary, digitalization refers to take advantage of digital technology to alter business models and afford the opportunities of new gainings and value creation (J. Gray & Rumpe, 2015). J. Gray and Rumpe (2015) considered that digitization refers to the process of transforming analog information streams into digital bits. Osmundsen et al. (2018) defined digitization as the utilization of digital technology to alter the technical structure of society. Digitization is a disruptive force spawned by the fourth industrial revolution and digital technologies that is altering how individuals perceive business operations and activities (Brennen & Kreiss, 2016).
Digitalization is affecting a variety of business activities, including new business models, new partnerships, new products and services, and new relationships between enterprises and customers (Rachinger, Rauter, Müller, Vorraber, & Schirgi, 2019).
Digitalization is the integration process of reality and virtual, which is becoming the main driving force of enterprise innovation and change (B. Ziolkowska, 2020).
Consequently, based on the research of previous scholars, digitization can be defined as: utilizing digital technology to digitally transform specific businesses and scenarios, achieving cost reduction and efficiency improvement for businesses, and implementing systemic and comprehensive changes to the business models and operation modes of enterprises, governments, and other organizations.
2.2.2 Definition of Digital Innovation
Osmundsen et al. (2018) regarded that digital innovation is something fresh that can be supported by digital technology. Ciriello, Richter, and Schwabe (2018) defined digital innovation as the utilization of digital technology platforms to innovate products, processes, or business models. Hinings et al. (2018) defined digital innovation as a collection of inventive outcomes realized by leveraging digital technologies and processes. Consequently, based on previous scholars' research, digital innovation can be defined as the combination of information, computing, communication, and connection technologies in the innovation process, including the improvement of the new product production process, the modification of organizational models, and the creation and modification of business models, with three core elements: digital
technology, innovation output, and innovation process. Digital technologies can guarantee the integration and interconnection of information, computer, communication, and networking technologies; Innovation output comprises the development of new goods, processes, organizations, and business models (Tennessee Section Institute of Transportation Engineers: TSITE, 2022).
2.2.3 Definition of DT
Westerman, Bonnet, and McAfee (2014) thought that DT is a method for leveraging digital technologies to enhance enterprise performance or influence. Bilgeri, Wortmann, and Fleisch (2017) considered that DT is driven by digital technology, which can produce or support significant organizational changes that affect corporate operations. McKinsey (2021) believed that DT is a methodical endeavor that necessitates the global mobilization of businesses and a transformation journey led by the synchronized advancement of business, organization, and technology. DT is powered by NGIT (e.g. big data, cloud computing, AI, and blockchain), and data is the most important component. Realizing the production intelligence, accurate marketing, and intelligent operation and management of enterprises, which has spawned a number of new business forms, new models, and new driving forces, in order to achieve the high-quality quantitative and cross-field synchronous development of innovation- driven industries (INFOSWS, 2021). DT refers to the transformation of traditional firms by connecting their production, management, and sales businesses with cloud computing, the Internet, and big data, which can further boost the DT of the R&D, production and processing, operation management, and sales services businesses (National Development and Reform Commission: NDRC, 2020).
Consequently, with digital empowerment and DT, enterprises can achieve the innovation and upgrading of business models and ecosystem reconstruction, cost reduction, enhancement of management effectiveness, and creation of added value.
2.2.4 The Relationship between Digitalization, Digital Innovation and DT Currently, digital innovation and DT can provide substantial competitive advantage (Demirkan, Spohrer, & Welser, 2016). Digitization is the driving factor behind product and service innovation. DT is the cumulative effect of digital innovation
that modifies, threatens, replaces, or enhances the established game rules of organizations and fields (Hinings et al., 2018). DT, digitization, and digital innovation are sometimes used synonymously. These ideas are founded on digital technology.
Secondly, digitalization can be accomplished through digital innovation. Thirdly, digitization and digital innovation can alter the enterprise’s business model and result in the DT of organizations or the entire industry (Osmundsen et al., 2018).
Digitization has altered the traditional retail trading places, the nature of retail products, the retail environment, and retail participants (Hagberg, Sundstrom, & Egels- Zandén, 2016). Both DT and digital innovation must integrate information systems and study systems and technologies in different fields to promote the required changes (Wißotzki, Sandkuhl, & Wichmann, 2021). Digital innovation can strengthen customer-oriented and employee-oriented processes, optimize existing products, and develop new business models. Digitalization facilitates organizational process, product, and business model transformation.
2.2.5 Definition of Pharmaceutical Enterprises and DT of Pharmaceutical Enterprises
Pharmaceutical enterprises are enterprises in the pharmaceutical industry, which can be categorized as pharmaceutical production enterprises and pharmaceutical trading enterprises. According to the definition in the “Drug Administration Law of the People’s Republic of China,” drug manufacturing enterprises are exclusively or concurrently engaged in the production of drugs; pharmaceutical trading enterprises are exclusively or concurrently engaged in the trading of pharmaceuticals (Xinhua News Agency, 2019). Pharmaceutical enterprises are typically industrial enterprises, such as chemical preparation enterprises, chemical drug raw materials enterprises, Chinese patent medicine enterprises/traditional Chinese medicine decoction enterprises, biological and biochemical products enterprises, medical device enterprises, pharmaceutical special equipment manufacturing industry, sanitary materials enterprises, and so on (Alliance of Industrial Internet, 2021). DT refers to the use of digital technology for enterprise management, resource organization, product production, and product service in the pharmaceutical enterprises.