The Effects of Knowledge Spillovers, Digital Capabilities, and Innovation on Firm Performance: A Moderated Mediation Model

Despite the growing importance of implementing digital technologies in business contexts, empirical research relating to digital capabilities, innovation, and business performance still remains scarce, particularly relevant in these times of disruption. This study proposes a mediated-moderated framework to describe, according to the level of economic development of the country of firm location, the direct and indirect effects (mediated by digital capabilities and innovation) of knowledge spillovers on firm performance. We carried out a quantitative study deploying the longitudinal World Bank Enterprise Surveys for 2019, 2020 and 2021 in a dataset that included 27,727 firms from 41 countries and territories. We applied the partial least square structural equation modelling (PLS-SEM) methodological approach to test the mediated-moderated model that explains business performance. The results identify how knowledge spillovers positively influence firm performance through digital capabilities and innovation. Furthermore, we empirically demonstrate that the national level of economic development moderates the direct and indirect impacts of knowledge spillovers on firm performance.