The role of digital orientation in moderating the relationship between innovation and internationalization

PurposeThis research aims to examine the moderating role of digital orientation (DO) on the relationship between innovation and internationalization by framing the relationship under an agency, resource-based view (RBV) and organization orientation (OO) theory.Design/methodology/approachThis study focuses on a sample of 392 listed companies in Malaysia from 2011 to 2018 and estimates the model under the double clustered regression, dynamic GMM panel model and one-lagged model to tackle endogeneity and reversal causality. This study also did a logit model as an additional robustness check.FindingsThe findings support the RBV perspective: Companies with intensive innovation have high internationalization. However, the findings refute OO theory by revealing the evidence that DO leads to low internationalization. Supplemental analysis suggests that innovation impact on internationalization occurs in assets and sales internationalization (exports).Research limitations/implicationsAccording to the RBV theory, innovation is strategic value creation for the organization to achieve competitiveness. A company can expand its market internationally when the business process is more productive and efficient due to innovation. The innovation process is closely related to DO. Hence, this research explores whether DO may strengthen the effect of innovation on the internationalization process.Originality/valueThis study examines the effect of DO on innovation and internationalization implementation by contesting agency theory, RBV theory and OO theory within an emerging country context.