From automation to databased business models - digitalization and its links to innovation in small and medium-sized enterprises

Digitalization is one of the main trends affecting firm-level innovation today. In this context, a better understanding of the multidimensional relationship between digital technologies, competences and firm-level innovation is necessary. For this purpose, this paper examines the role of digital transformation in the context of innovation activities of small and medium-sized enterprises (SMEs). Based on a systematic review of the fourth edition of the Oslo Manual and a subsequent qualitative content analysis (QCA) of interview data on innovating German SMEs, a category system is derived covering different facets of the digitalization-innovation link along seven main categories and 32 sub-categories. This category system is employed to analyze the interview data, with several findings pointing to the heterogeneity of innovating SMEs in terms of digitalization. It emerges that there tend to be two ideal types of "digitalizers" among innovating SMEs. On the one hand, process innovators using digital technologies and practices to generate efficiency and automation benefits, whereby they must build up basic digital competences within the firm to achieve this aim. On the other hand, product innovators with advanced competences in digitalizing their goods and services that have often already gained experiences in adopting a digital business model. The paper concludes with implications for innovation measurement, policy and further research.