Exploring the role of digital servitization for green innovation: Absorptive capacity, transformative capacity, and environmental strategy

Despite the growing interest in digital technologies to achieve servitization goals, there is a lack of comprehensive understanding of the factors that drive firms to adopt digital servitization. In addition, there has been a lack of theoretical insight into how digital servitization can act as a trigger to enable the flourishing of green innovation in product service systems (PSS). The traditional view on dynamic capabilities may not suitably adapt to the challenges and chances presented by rapidly changing digital environments that are necessary for pursuing green innovation. Consequently, we examined the central role of digital servitization in improving green innovation, commencing with an analysis of the absorptive capacity to adapt to rapidly changing systems while considering the moderating role of transformative capacity. This study obtained and analyzed 482 Korean firms adopting PSS through the structural equation method. The research results reveal a mechanism for improving a green innovation capability based on digital servitization and provide practical implications for firms and stakeholders. Theoretically, we contribute to the literature by unveiling the relationship between firms' dynamic capabilities and green innovation performance. Various interconnections were considered to comprehend a firm's digital servitization strategy. As managerial implications, we recommend that PSS firms closely focus on adjusting their strategy to suit the rapidly evolving digital landscape.