In recent years, the share of firms that engage in digitalisation activities has been rising whereas the share of firms with product or process innovations has been gradually declining. The aim of the study was to explore the reasons for this development. The study investigated the link between digitalisation and innovation in small to mid-range firms in Germany through three approaches:

1. On a conceptual level, the study analysed the standard definitions of digitalisation and innovation and how the particular role of digitalisation as a driver of innovation is represented in defining and measuring innovation in firm surveys.
2. On a broad empirical bases, characteristics of firms that have both digitalisation and innovation activities, or only one type of such activities, were investigated, employeing data from the KfW SME Panel and the Mannheim Innovation Panel of ZEW.
3. Through 20 interviews with small to mid-range firms, differences and overlaps of digitalisation and innovation activities were discussed with managers.