Contingent Performance Impact of Digital Transformation Orientation: An Organizational Change Perspective

Despite growing global emphasis on the potential of digital transformation as a strategic orientation, firms often struggle to realize its anticipated benefits. To clarify the intricate relationship between digital transformation orientation (DTO) and firm performance, this study proposes that organizational changes exert powerful influences. A longitudinal data set pertaining to 2,766 Chinese public firms, for the years 2010–2022, reveals that on average, DTO diminishes firm performance (return on assets), but this negative impact also is moderated by specific organizational changes, both asset-centric (e.g., asset divestiture, expansion) and human-centric (e.g., executive and employee turnover). Asset divestitures and expansion mitigate the negative impacts of DTO by optimizing resource allocations; employee turnover introduces new skills that can alleviate these adverse performance impacts. However, frequent IT executive turnover exacerbates the negative performance impacts by disrupting strategic persistence and leadership stability. The combined results thus help address prior mixed findings regarding the performance implications of DTO and highlight contingencies stemming from organizational changes. In underscoring the importance of aligning organizational change initiatives with DTO, the current study offers actionable recommendations for firms navigating their own digital transformation journeys.