Impact of Digital Trust on Open Innovation and Firm Performance in Pakistan Pharma Industry: The Mediating Role of Knowledge Processing Capabilities Complemented by Information Sharing

Abstract

With the world evolving to a digital environment, pharmaceutical companies in developing markets such as Pakistan are under more pressure to embrace innovative approaches that can bring competitiveness and long-term viability in performance. This paper examines how digital trust affects open innovation and performance of firms in the Pakistani pharmaceutical market. Digital trust is the measurement of the technological preparedness dimensions of innovation, discomfort, and insecurity, which are conceptualised as a major facilitator of open innovation. We contend that digital trust (DT), measured by DT innovation and DT insecurity positively influenced by knowledge processing capabilities measured by Knowledge Acquisition, knowledge Dissemination, and Knowledge utilisation. These capabilities, in turn, positively affect open innovation and ultimately firm performance based on the performance indexes like general operational efficiency, market share expansion, and payback. We also infer that information sharing positively moderates the effect of digital trust on open innovation in a way that higher levels of information sharing will strengthen the effect of digital trust on open innovation. The quantitative research design was used. Data was collected from 201 professionals working in the pharmaceutical industries in Karachi, Pakistan, using a closed-ended questionnaire and analysed using confirmatory factor analysis and partial least square structured equation modelling (PLS-SEM). The results demonstrate that digital trust is a major driver of open innovation, which in its turn has a positive impact on the firm's performance. Results also showed that the insecurity dimension showing positive impact, while the innovation dimension showed mixed effects on knowledge processing capabilities. Moreover, there was a partial mediation between digital trust and open innovation by the capabilities of knowledge processing. However, the moderating effect of information sharing remained inconclusive. Overall, the study highlights the critical role of digital trust and knowledge management in fostering innovation performance in the pharmaceutical industry. This study expands the open innovation and digital trust literature into an unstudied, regulated sector of a developing economy. In practice, it provides practical suggestions that pharmaceutical companies and policymakers can use to advance innovation and improvement through digital trust and collaborative knowledge strategies. These results highlight the urgency of digital maturity and an open information space that would allow regulated markets, such as pharmaceuticals, to experience sustainable innovation.