Digital Innovation: Does distance matter in virtual cross-border R&D Alliances?

Abstract

Our study examines the conditions under which cross-border digital innovation alliances are effective. Specifically, we investigate the moderating effect of technological, cultural, and geographic distance. The findings indicate that, although important, relative absorptive capacity is not a sufficient condition for effective collaboration in a cross-border, digital innovation context. Firms need to consider the optimum technological distance as well as the combined effect of technological distance with the effect of cultural and geographic distance. Specifically, a high level of cultural distance can be beneficial in combination with high relative absorptive capacity and low technological distance. Alternatively, a high absorptive capacity also leads to high digital intensity if both the cultural and the technological distances are low. Conversely, a high level of absorptive capacity does not yield positive results when the technological distance is high regardless of the degree of the cultural distance between the partner firms. Further, when the technological distance between two firms is low, a higher geographic distance may strengthen the positive impact of firms’ high absorptive capacity on digital innovation outcomes.