Digital transformation under uncertainty - market value effects of early Industry 4.0 innovation projects

In the initial phase of Industry 4.0 between 2011-2016, companies have been driven to invest massively in the development of digital innovation, which is linked to uncertainty. In particular, studying the interrelationship between digital innovation type (process vs. product) and institutional arrangement (alliance vs. internal) is of great interest to know how to develop them and what setting is best suited. Drawing on real options theory and extended resource-based view, this study applies event study methodology to 578 announcements by German and U.S. companies providing three contributions. First, this research quantifies the market value impact of digital innovation in a period of uncertainty. Second, the finding (negative abnormal returns of -0.23%) refines the common notion that digital innovations must be value-adding per se. Third, the study provides guidance to managers that digital process innovations are better developed in alliances and digital product innovations in-house to address the uncertainty. (c) 2023 The Authors. Published by ELSEVIER B.V.