Big Data Utilization in Innovation: Innovation Enhancing Activity or Capability-Enhancing Activity?

Abstract

The potential benefit of big data utilization through the generation of data-driven knowledge raises questions about its role in firms’ innovation performance. This paper explores two roles of big data utilization on firms’ innovation: ‘innovation-enhancing activity’ and ‘capability-enhancing activity’. While the first role highlights big data utilization as one enabler of the data-driven innovation process, the latter emphasizes the role of big data utilization to complement firms’ external knowledge search activity to enable greater innovation performance. Using the matched data of the UK E-Commerce and ICT Survey 2015 and the UK Innovation Survey 2017 for over 1,300 firms in the UK, we use both probit and OLS regression models to investigate how big data utilization both directly and indirectly influence firms’ innovation performance, measured by innovation outcomes and innovation productivity. While we find no evidence for big data utilization as innovation-enhancing activity, our results support big data utilization as capability-enhancing activity. Our results indicate the indirect effect of big data utilization on firms’ innovation performance and emphasize the role of big data utilization to complement firms’ search behaviour by enhancing firms’ absorptive capacity and collaboration capability. Our results highlight both the capability-enhancing role of big data utilization and the importance of adopting a strategic approach to maximize the innovation benefits of big data utilization and external knowledge search activity.