Navigating the Benefits and Challenges of Developing Disruptive Digital Technologies: Evidence from Chinese Listed Companies

In recent years, the prioritization of disruptive digital technologies such as cloud computing, big data, AI, and blockchain has gained momentum within management circles. Increasingly, these technologies are being integrated into existing organizational structures, with the objective of enhancing productivity and unveiling new market opportunities (Christensen 2013). As powerful catalysts of innovation, these technologies urge organizations to reevaluate and reconfigure their production and operation frameworks, thereby maintaining competitiveness and capturing strategic advantages (Davenport et al. 2020). However, according to a 2019 survey of directors, CEOs, and senior executives, 70% of all digital transformation initiatives fail to meet their objectives (Tabrizi et al. 2019). To avoid squandering resources on digitalization, it is crucial to understand the reasons behind the success or failure of these digital transformations.

Disruptive digital technologies, defined as innovative, technologically advanced tools and systems (Sousa and Rocha 2019), can potentially revolutionize existing business models, create new markets, and significantly affect how businesses or entire industries operate (Kane et al. 2015). Despite their potential for bringing significant efficiency improvements and revealing new opportunities, their implementation requires considerable investment and strategic planning (Furr and Shipilov, 2019). Thus, to effectively navigate these opportunities and challenges, firms must cultivate a strategic understanding and application of disruptive digital technologies.

Despite the growing prevalence of these technologies, existing literature provides limited empirical evidence linking their development to long-term firm performance. Our objective is to explore in detail the multifaceted impacts of disruptive digital technologies on firm performance. To fulfill our research objectives, we collected longitudinal data (2010–2022) from Chinese listed companies. We utilized text-mining techniques (Bao and Datta 2014; Guerreiro et al. 2016; Li et al. 2021) and designed a program to identify and extract relevant keywords from the firms’ annual reports (Janasik et al. 2009; Weiss et al. 2010), providing a measure of a company’s evolution in developing disruptive digital technologies. We then proposed a framework that links Chinese listed firms’ utilization of disruptive digital technologies with performance.

Our preliminary analysis reveals that a company’s development of disruptive digital technologies can yield benefits such as structural integration and revenue diversification while also incurring costs such as human capital volatility and operational disruption. Additionally, we propose that certain boundary factors, such as the innovation domains where companies are applying these disruptive digital innovations, local institutional development, and competitive intensity, can alter this mechanism. By acknowledging these boundary conditions, we demonstrate that not all companies will benefit from developing disruptive digital technologies, and that success is largely dependent on specific competitive environments.

This research makes three potential theoretical and practical contributions. First, we offer an empirical investigation into the performance implications of developing disruptive digital technologies within defined parameters. Second, we contribute to the field of digital transformation research by delineating both the positive and negative mechanisms through which disruptive digital technologies can shape an organization's long-term performance. Finally, our findings provide managers with a practical framework and a set of guidelines to effectively develop and implement digital transformation strategies.