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1. Introduction
Digitization has become one of the trendiest topics in manufacturing (Feng and Shanthikumar, 2018; Holmström et al., 2019). It has even been suggested that digital technologies are defining a new industrial revolution (Kagermann, 2015; Schwab, 2017). Digitization presents new opportunities for radical and incremental process innovation (Brynjolfsson and Schrage, 2009; Robertson et al., 2012; Shih, 2018). It promises to deliver both decreased production costs and increased flexibility – two competitive capabilities that have traditionally been seen as trade-offs (Boyer and Lewis, 2002). Due to these potentials, many manufacturers are strategically working to introduce new digital technologies into their factories (Olsen and Tomlin, 2020; World Economic Forum, 2019). One significant challenge is that firms often lack knowledge about these new digital technologies and their potentials and drawbacks. To innovate their processes, they often require technological knowledge that may be absent or that exist only at a rudimentary level within the firm. Hence, they must search for it externally. In this paper, we study these mechanisms by investigating the role of external search in the digitization of manufacturing.
To study this topic, we draw on the concept of absorptive capacity (cf. Cohen and Levinthal, 1990; Todorova and Durisin, 2007; Zahra and George, 2002), which explains how and how well firms are able to insource external knowledge and put it to use. This theoretical perspective is foundational for the business practice known as open innovation, that is, the ability to innovate based on knowledge exchange with external parties (Bogers et al., 2017; Chesbrough, 2003). The open innovation literature predicts that firms innovate more successfully when they adopt an open strategy for developing innovations (Reichstein and Salter, 2006; Robertson et al., 2012; Trantopoulos et al., 2017; Vega-Jurado et al., 2009). Open refers to the free exchange of knowledge (ideas, solutions, technologies, etc.) with external parties as opposed to no, or a very limited, exchange of knowledge (i.e., closed innovation) (Chesbrough, 2003; Enkel et al., 2009). When engaging in open innovation, firms actively search for and access knowledge outside their boundaries and convert it into actionable ideas (Laursen and Salter, 2014).
Digitization of manufacturing involves a number of process innovations. Yet, while open innovation has been much discussed in the...