Digital entrepreneurship: The role of entrepreneurial orientation and digitalization for disruptive innovation

It's widely recognized that both innovation and entrepreneurship play crucial roles in driving economic growth. When we talk about innovation, particularly disruptive innovation, we're referring to groundbreaking changes that have the potential to reshape markets completely.

This isn't just about technology; it encompasses innovative business models, processes, and services. Disruptive innovation shakes things up by introducing radically new functionalities, technical standards, or ownership models.

Over the past decade, disruptive innovation has gained significant attention in academic and management thinking and practices. Some examples are companies like Amazon, Apple, and Dell, which have revolutionized their industries with disruptive innovations such as online distribution, strategic moves in music and smartphone technology, and direct-to-customer sales of computers, respectively.

Digitalization in the European Union is seen as a transformative force that can help address societal challenges, particularly in response to events like the COVID-19 pandemic. The EU has launched initiatives like the Digital Europe program to support businesses, citizens, and public administrations with digital technologies. Besides, the pandemic has stressed the importance of digital maturity for organizational flexibility and resilience.

In the financial industry, research has already explored how combining entrepreneurial orientation (EO) with strategic digitalization can drive high performance. However, while disruptive innovation is strategically crucial, what factors actually foster it?

This study aims to delve into the roles of EO and digitalization strategy in the context of disruptive innovation. Specifically, we'll investigate the relationships between EO, digitalization strategy, and disruptive innovation, as well as explore whether a strongly structured digital strategy might hinder disruptive innovation, as suggested in some research on strategic planning in new product development.

To answer these questions, we conducted a survey involving 242 firms across various industries, locations, and sizes in Italy. Our analysis aims to shed light on how these factors interact and influence disruptive innovation in real-world organizational settings.

Our findings show that EO has a significant positive impact on disruptive innovation. This aligns with previous research highlighting EO's positive relationship with product or service innovation in general. Essentially, being proactive, innovative, and risk-taking pays off if a firm aims for groundbreaking, disruptive innovations that can shake up markets.

Additionally, our results underscore the positive correlation between EO and digitalization strategy. This suggests that firms with a high EO level are more likely to adopt a strategic approach to digitalization. Essentially, being entrepreneurial fosters innovation and strategic thinking, which is expected given EO's nature as a strategic orientation.

Furthermore, it highlights that digitalization strategy has a significant positive effect on disruptive innovation, and part of this effect of EO on disruptive innovation operates through the level of digitalization strategy. This echoes previous research emphasizing the crucial role of digitization in driving innovation and suggests that a firm's digital organizational capabilities can mediate these relationships.

Lastly, our study shows that the digitalization strategy's structuration and deployment level negatively moderate the relationship between EO and disruptive innovation. Interestingly, firms with a high EO level may need a lower level of digitalization strategy deployment to promote disruptive innovation, while the opposite holds for firms with a low EO level.

In the case of a firm that is heavily entrepreneurially oriented, a strongly structured digitalization strategy can be a hindrance to innovation because while EO is strategically focused, it also needs a degree of openness. While a digitalization strategy is a helpful organizational tool, strategic focus can be hindered by the rigidity that can come with the strategy.

Our study offers relevant insights for managers and decision-makers regarding innovation.

Firstly, organizations should prioritize entrepreneurial orientation to enhance disruptive innovation. Focusing on EO, characterized by risk-taking and proactivity, is crucial for fostering disruptive innovation rather than solely relying on a digitalization strategy. While EO significantly influences disruptive innovation, an overly structured digitalization strategy may hinder it, particularly in highly entrepreneurial firms. However, a digitalization strategy can support disruptive innovation for less entrepreneurial firms, albeit not as effectively as EO. Thus, firms need to calibrate their digitalization strategy deployment based on their EO level and innovation goals.

Secondly, disruptive innovation necessitates flexibility and a conducive environment for free thinking. While digitalization can drive both incremental and disruptive innovation, excessive emphasis on structuring a digitalization strategy might hinder disruptive innovation, especially in highly entrepreneurial firms. Hence, such firms should explore alternative approaches to promote digitalization without constraining innovation. For instance, fostering a more organic approach to digitalization through digital evangelists or mentoring could be beneficial, avoiding overly rigid strategies.

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The Authors at the Department of Management

Ludovico Bullini Orlandi – Senior Assistant Professor

Academic disciplines: Organization and Human Resource Management

Teaching areas: Organization Theory and Design

Research fields: Digital transformation, HRM, Newcomer socialization

Ludovico Bullini Orlandi is an Assistant Professor in Organization and HRM at the University of Bologna and co-director of the Master in HR and Organization at the Bologna Business School. He holds a Ph.D. in Economics and Management from the University of Verona. His research interests revolve around the impact of digital transformation on HR and organizations. He teaches Organization Theory at the University of Bologna. He has held visiting and research collaborations at the University of Lund and the Karlsruhe Institute of Technology. He has also taught at the CUOA Business School, the Catholic University of Lille, and the University of Verona.