The interplay between firm innovation, digital capabilities and HR skills and practices: The moderating role of GVC participation

• Firm innovation, digital capabilities and HR skills and practices are inextricably linked. • The participation of firms in GVCs moderates such interlinkages. • A bundle of HR practices and skills enhance digital capabilities which in turn contribute to firm innovation. • Digital capabilities play a stronger orchestrating role for GVC firms introducing product innovations. • Non-GVC firms benefit more in building digital capabilities from implementing a bundle of HR practices. In this study, we argue that the coordination of resources and people is conducive to building digital capabilities that transform innovation processes within firms, especially in a global value chain (GVC). GVC participation expands as well as obscures a firm’s boundaries. Therefore, GVC member-firms’ orchestration needs are greater, and as such, the interlinkages between digital capabilities, HR skills and practices, and innovation outcomes are stronger. Using a sample of 1014 Greek manufacturing firms, we estimate a system of equations to investigate the moderating role of GVC participation in the examined interlinkages. Empirical results confirm that developing HR skills and practices matters in building digital capabilities that consequently shape firms’ innovation outcomes. Digital capabilities have a stronger orchestrating role for GVC member-firms aiming to introduce product innovations, and for nonparticipants, the process of building digital capabilities benefits more from implementing a bundle of HR practices.