Research objective This research aims to examine the impact of reciprocal mediating effect of digitalization and Balanced Scorecard (BSC), as one of the most commonly used management accounting innovation, on their relationship with overall performance of business firms, and to examine the effect of innovation strategy on firm digitalization level. Research method: Data is collected through a Survey conducted in the first half of 2022 on business firms, excluding financial institutions like banks, insurance companies and other financial establishments. A sample was selected that included 500 profit-making firms from various sectors, service and industrial, and the response rate reached 44 %, while the usable rate reached 36.4 %. Simple regression analysis is used to test the relationship between innovation strategy and digitalization, and Process Macro model for SPSS is used to test the reciprocal mediating effect of digitalization and BSC on their relationship with firm performance. Research results: results indicated that futuristic innovation strategy affect digitalization level within firms. Furthermore, statistical analysis results revealed that, although BSC significantly affect firm performance, yet, there is neither significant mediating role of BSC on the relationship between digitalization and firm performance, nor there is a significant mediating role of digitalization on the relationship between BSC and firm performance. Added value: Few studies examined the reciprocal mediation effect of digitalization proxied by information technology (IT) systems and management accounting innovations proxied by BSC on their relationship with overall performance of business firms. Few studies addressed the application of BSC, within Egyptian firms, first in their relationship as a mediating variable between IT systems and the overall performance of business firms, and its role in assessing the innovation ability of firms. And second, in their relationship as an exogenous variable - and not as mediating variable - with IT systems and the overall performance of businesses. Research limitation: research limitations were mostly related to the empirical study, where the research sample did not include financial institutions, also the sample selection method, which was chosen in a non-probabilistic manner, but it may not really represent all population units, and this may be due to lack of a reliable database for selecting the sample in a probabilistic manner. This is in addition to the fact that all of the sample units represented profit-seeking business firms, which means that the results may be generalizable only in relevance to this category of business firms. Another limitation lied in the bias of survey respondents toward favoring the application of techniques they were part of its decision-making process. This led to high multicollinearity between model variables.