CHAPTER 2 LITERATURE REVIEW AND THEORETICAL FRAMEWORK
2.5 Conceptual Framework and Research Hypotheses
2.5.2 Research Hypotheses
1) The relationship between the external environment and DT of enterprises
The first variable that affects DT is the external environment. On the perspective of the external environment, the external environmental factors (e.g.
technical capabilities, competitive pressure) can influence DT (K. Zhu et al., 2006). The external factors can impact the DT of SMEs (Tarutė et al., 2018). Cloud computing characteristics, cost reducing, productivity gains, headquarters policies, customer behavior, and competitive pressures are some of the external environmental factors driving enterprise DT (Narungsun Wilaisakoolyong, 2018). Through enterprise digital conversion, customer needs can be discovered and satisfied (Loonam, Eaves, Kumar,
& Parry, 2018). The goal for organizational expansion, market share increase, market competition, and survival are all important drivers for enterprise DT (Hadia & Hmoodb, 2020). The external environment (e.g. government policies) can promote enterprise DT (Tsenzharik et al., 2020). Government policies and regulations can impact individuals’
and organizations’ creative abilities for using digital technology. To support enterprise DT, the government should develop appropriate financial support policies and strategies (Chunliang Chen, Lin, Chen, Chao, & Pandia, 2021). To encourage enterprise digitalization, the government provides subsidies to enterprises that begin employing digital technologies (Chunliang Chen et al., 2021). It is vital for the government to develop relevant policies to supervise enterprise DT (Majchrzak, Markus, & Wareham, 2016). Digital technology serves as the enterprise DT’s guarantee (Châlons & Dufft, 2017). Therefore, the above findings lead to the following hypotheses:
H1: The external environment can significantly affect DT.
H1a: Customer needs can significantly affect DT.
H1b: Market competition can significantly affect DT.
H1c: Government policy can significantly affect DT.
H1d: Digital technology can significantly affect DT.
2) The relationship between the external environment and digital innovation (DI)
The external environment stimulates digital innovation, and consumer issues and needs drive enterprise digital innovation (Nadeem, 2018). Changes in customer needs can stimulate digital innovation (Abrell et al., 2016). The pressure of market competition forces enterprises to carry out digital innovation (Kostić, 2018).
Government policies can stimulate innovation and R&D (Wei et al., 2013). R&D investment and tax incentives can improve the performance of digital innovation (H.
Zhou & Zhang, 2015). Government financial assistance for enterprise innovation is very significant (Doh & Kim, 2014). Digital technology can create innovation opportunities for enterprises and support the digital innovation process (Nylén &
Holmström, 2015). Thus, the above findings lead to the following hypotheses:
H2: The external environment can significantly affect DI.
H2a: Customer needs can significantly affect DI.
H2b: Market competition can significantly affect DI.
H2c: Government policy can significantly affect DI.
H2d: Digital technology can significantly affect DI.
3) The relationship between the external environment and the internal conditions
In the process of enterprises’ rapid development, the external environment can have a significant impact on the alterations of their internal conditions (Wolf et al., 2018). In the process of enterprises’ rapid development, the external environment can have a significant impact on the alterations of their internal conditions (Tarutė et al., 2018). The pressure of market competition, the need to reduce costs, and enhance productivity compel enterprises to adopt digital strategies to achieve a competitive advantage (Narungsun Wilaisakoolyong, 2018). The enterprise DT strategy is beneficial, but it must be built on an understanding of customer needs and technology (Heavin & Power, 2018). Applications of digital technologies can facilitate organizational transformation and make organizations more agile (Ifenthaler &
Egloffstein, 2020). Government policies can encourage enterprises to develop digital strategy. The applications of digital technology can contribute to the enhancement of organizations’ dynamic capacities. Internet applications can influence the agility and adaptability of medical organizations (Chakraborty, Bhatt, & Chakravorty, 2019).
Thus, the above findings lead to the following hypotheses:
H3: The external environment can significantly affect the internal conditions.
H3a1: Customer needs can significantly affect digital strategy.
H3a2: Customer needs can significantly affect organization capability.
H3a3: Customer needs can significantly affect leadership.
H3b1: Market competition can significantly affect digital strategy.
H3b2: Market competition can significantly affect organization capability.
H3b3: Market competition can significantly affect leadership.
H3c1: Government policy can significantly affect digital strategy.
H3c2: Government policy can significantly affect organization capability.
H3c3: Government policy can significantly affect leadership.
H3d1: Digital technology can significantly affect digital strategy.
H3d2: Digital technology can significantly affect organization capability.
H3d3: Digital technology can significantly affect leadership.
4) The relationship between the internal conditions and digital innovation (DI)
The promotion of digital innovation is facilitated by a company’s internal environment (Nasiri et al., 2020). The evolution of enterprise digital innovation is determined and guided by digital strategy. Agile organizations and learning organizations can support digital innovation (Guinan et al., 2019). Organization capability can significantly impact digital innovation (Chan, Teoh, Yeow, & Pan, 2019). Leadership can influence the establishment of digital innovation mechanisms, and leadership support has a substantial impact on fostering digital innovation (L.
Mihardjo et al., 2019). The integration capability and technological innovation capacity of enterprises can support digital innovation behavior (Y. Wang, Su, Wang, & Zou, 2019). Thus, the above findings lead to the following hypothesis:
H4: The internal conditions can significantly affect DI.
H4a: Digital strategy can significantly affect DI.
H4b: Organization capability can significantly affect DI.
H4c: Leadership can significantly affect DI.
5) The relationship between the internal conditions and DT of enterprises
Tsenzharik et al. (2020) constructed the indicators of internal environmental elements of DT. Internal conditions can promote enterprise DT (Wolf et al., 2018). Digital strategy significantly influences the development of enterprises and is the key to the success of transformation (G. C. Kane et al., 2015). Agile organizations and learning organizations provide support for enterprise DT (Gergs, 2019). The scale of the organization affects the urgency of DT to a certain extent (Prasad & Junni, 2017).
The style of leadership will affect the DT of the organization (Sow & Aborbie, 2018).
Digital change leaders support organizational and digital change (Schiuma et al., 2021).
The support of senior leaders for DT determines the success or failure of enterprise DT (Singh & Hess, 2020). Thus, the above findings lead to the following hypothesis:
H5: The internal conditions can significantly affect DT.
H5a: Digital strategy can significantly affect DT.
H5b: Organization capability can significantly affect DT.
H5c: Leadership can significantly affect DT.
6) The relationship between digital innovation (DI) and DT of enterprises
Digital innovation can significantly impact the development of enterprises (Hinings et al., 2018). The mechanism of digital innovation can effectively reduce the risks of DT and promote transformation of enterprises (Huang, Henfridsson, Liu, & Newell, 2017). Digital innovation can trigger enterprise DT. Digital innovation investment is the guarantee condition of DT (Hanelt et al., 2021). Thus, the above findings lead to the following hypotheses:
H6: DI can significantly affect DT.
7) The relationship between company size and DT of enterprises The scale of a company, as measured by the number of employees, can also influence whether or not DT is conducted. Additionally, the size of a company’s assets will influence its behavior. The company’s capacity for digital process success is influenced by its size (Härting et al., 2017). Company size has a moderating effect on the performance of the AI applications of manufacturing enterprises (J. Chen &
Meng, 2021). Company size can have a moderating effect on R&D and manufacturing innovation (S. Wu, Zhang, & Huang, 2018). Company size can have a regulatory effect on the environmental performance of enterprises (Y. Xie, 2022). Small enterprises frequently lack the funding, capacity, and technology required to implement DT. Larger enterprises, on the other hand, have greater experience in change management, more capital and human resources to drive digitalization, and relatively strong digital technologies and capabilities. Thus, the above findings lead to the following hypotheses:
H7: Company size can significantly moderate the relationship between the external environment and DT;
H8: Company size can significantly moderate the relationship between the external environment and DI;
H9: Company size can significantly moderate the relationship between the internal conditions and DT;
H10: Company size can significantly moderate the relationship between the internal conditions and DI;
H11: Company size can significantly moderate the relationship between the external environment and DT through DI.
H12: Company size can significantly moderate the relationship between the internal conditions and DT through DI.
8) The impacts of the internal conditions and digital innovation as mediating variables on DT.
The changing external environment leads enterprises to carry out digital innovation to obtain new competitive advantages (Kohli & Melville, 2019). The external environment can influence the changes of enterprises’ internal conditions, and enterprises’ internal conditions are favorable to fostering digital innovation (Nasiri et al., 2020). The internal conditions are the main driving force to promote enterprise DT (Wolf et al., 2018). Therefore, according to the previous research, the following hypotheses can be deduced:
H13: DI can significantly mediate the relationship between the external environment and DT.
H14: The internal conditions and DI can significantly mediate the relationship between the external environment and DT.
H15: The internal conditions can significantly mediate the relationship between the external environment and DT.