Innovation Configuration Patterns: How Emerging Market Firms Combine Digital Transformation with Traditional Business Models

Abstract

This study examined the configurational patterns and strategic combinations through which emerging market enterprises (EMEs) integrate digital transformation initiatives with traditional business model innovation to achieve dual performance outcomes. Despite the documented potential of business model innovation (BMI) in emerging markets, significant gaps remain in understanding how firms systematically combine pioneering exploration with perfecting exploitation strategies while navigating institutional constraints and competitive pressures. The research employed fuzzy-set qualitative comparative analysis (fsQCA) on 55 Chinese technology ventures to identify sufficient configurations for achieving both substantive performance (financial outcomes) and symbolic performance (legitimacy and social recognition). The findings reveal three critical patterns in digital-traditional integration that have profound implications for competitive positioning and sustainable growth. Contrary to conventional wisdom about innovation trade-offs, enterprises implementing dual BMI strategies demonstrate unexpected performance advantages, with pioneering BMI driving substantive performance through differentiation while perfecting BMI enhances symbolic performance through stakeholder alignment. However, no single BMI approach proves sufficient for dual performance, with only 43% of small enterprises achieving sustained success compared to 78% of larger organizations, indicating that organizational resources and strategic orientation remain crucial factors. Enterprises successfully integrating digital transformation with traditional models experience substantial performance improvements, with policy-driven pathways explaining 57.5% of high substantive performance cases and comprehensive strategic configurations achieving both competitive advantage and institutional legitimacy. Companies utilizing synergistic digital-policy orientations demonstrate superior market positioning through enhanced innovation capacity and reduced institutional uncertainty, with munificent environments providing critical support for technology-intensive strategies. Despite these promising outcomes, persistent barriers exist, including complex attribution challenges affecting 64% of businesses and institutional alignment difficulties requiring careful navigation of regulatory frameworks. The study concludes that innovation configuration patterns represent both a strategic opportunity and implementation challenge that determines competitive positioning in dynamic emerging markets. Digital orientation emerges as the most critical capability for substantive performance, while policy orientation and environmental munificence prove essential for symbolic performance, indicating that successful transformation requires systematic integration rather than purely technological adoption.