How Digital Transformation Affects Exploitative and Exploratory Innovation: An Innovation Structure Perspective

Digital transformation is rapidly emerging as a pivotal topic in business and academic discourse. Prior research has emphasized the profound impact of digital transformation on firm innovation. However, the precise influence of digital transformation on different forms of innovation remains unclear. Meanwhile, the role of change in innovation structures has largely been overlooked. This study investigates how digital transformation influences both exploitative and exploratory innovation through the decentralization of formal and informal innovation structures. Using a dataset of 26,014 patent applications from 156 listed companies in the core industries of China's digital economy, this study demonstrates a prominent promoting effect of digital transformation on exploratory and exploitative innovation. Digital transformation broadens a firm's information channels and facilitates organizational agility by accelerating decision-making, which in turn promotes exploitative innovation. It also enhances a firm's absorptive capacity and empowers it to identify and meet new consumer demands, fostering exploratory innovation. Furthermore, this study reveals that digital transformation challenges the traditional power structures of innovation decisions, enabling formal and informal structures to become more decentralized, which promotes knowledge flows and managerial incentives and, thus, positively affects exploitative innovation. These findings provide a deeper understanding of digital transformation and innovation management.