Synergistic effects of human capital and institutional quality on digitalisation's impact on technological innovation in the sustainable economy

Abstract

Despite the growing recognition of digitalisation's transformative potential in driving technological innovation and supporting a more sustainable economy, research on the conditions through which the relationship works remains underexplored, especially in the context of emerging economies. Drawing on the resource-based view and institutional theory, this study analyses how human capital and institutional quality moderate the impact of digitalisation on technological innovation using panel data from 47 sub-Saharan African countries (2000–2023) employing the conditional fixed effects and instrumental variable Poisson regression. The results indicate that digitalisation positively influences technological innovation within low- and middle-income countries. Digitalisation and technological innovation have a curvilinear (an inverted U-shaped) relationship in middle-income (low-income) countries. Institutional quality attenuates the positive impact of digitalisation on technological innovation in the full sample but not in low- and middle-income countries. Human capital improves the relationship between digitalisation and technological innovation; this is valid for middle-income countries. However, institutional quality diminishes the impact of human capital on technological innovation in low- and middle-income countries. The results are robust to additional controls and economic conditions, emphasising validity. The findings contribute to the literature by showing that aligning digitalisation with human capital and institutional quality enhances technological innovation and supports the transition toward a more sustainable economic development