This study aims to evaluate how co-innovation collaborations (both horizontal and vertical) and digitalization processes influence product innovation, while acknowledging that the development of a formal digital strategy might impact product innovation through the mediating effect of digitalization processes.
To test the proposed hypotheses, the study’s empirical exercise uses seemingly unrelated (SUR) biprobit regression models on a unique sample that includes information for 572 small and medium-sized enterprises (SMEs) from five Latin American countries for 2021.
The results of the biprobit SUR model suggest that both horizontal and vertical co-innovation collaborations as well as digitalization processes positively impact product innovation. In addition, it was found that digitalization processes play a key role in mediating the effect of adopting a formal digital strategy on product innovation.
The authors highlight the strategic implications of developing co-innovation collaborations for successful product innovation. In addition, the authors show how a structured, planned digital transformation process in SMEs supports innovation efforts by improving coordination between agents collaborating with the firm.
In practical terms, the results provide actionable insights into how to configure co-innovation collaborations to support product innovation. By highlighting the significance of the fit between internal structures and technology adoption, the study establishes critical pathways to strategize digital technologies’ implementation processes.
By analyzing the role over innovation outcomes of both horizontal and vertical co-innovation collaborations, this study adds evidence to the growing stock of work on co-innovation in SMEs, responding to calls for more research on how inter-firm collaborations drive innovation in these firms. Also, this research advances the understanding of the potentially beneficial effects of the alignment between digital transformation processes and digital strategy implementation, particularly in resource-constrained settings.
