Strategizing Digital Transformation in Chinese Listed Companies: The Impact of Disruptive Technologies and Organizational Change on Firm Performance

In recent years, organizations are increasingly focusing on the development of new technologies in order to successfully adapt their business plans to changing market demands and stimuli. The prioritization of disruptive digital technologies such as cloud computing, big data, artificial intelligence, and Internet of things has gained momentum within management circles, with the objective of reevaluating and re-configuring 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 create differentiated value by leveraging digital resources to align with developing and executing organizational strategy, which includes revolutionizing existing business models, expanding new markets, adjusting organization operation (Kane et al. 2015). Beyond considering digital transformation strategies individually, achieving the desired return requires the coordination of disruptive digital technologies and other strategic plans of the entire enterprise (Furr and Shipilov 2019). Thus, to strive for stable and growing profit returns, 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 the interaction effects between digital transformation and organizational restructure strategies to firm performance. Our objective is to identify the moderation role of organizational structure adjustment on the link between disruptive digital technologies and firm profitability. 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 indicates that disruptive digital technologies negatively affect an organization’s profitability. The negative effect is weakened or even reversed when the organization adopts appropriate adjustment strategies for capital, including financial assets and human capital. By acknowledging these interaction effects, we demonstrate that not all companies will benefit from developing disruptive digital technologies, and that success is largely dependent on specific competitive resources and organizational decisions.
This research makes three potential theoretical and practical contributions. First, we offer an empirical investigation into the performance implications of developing disruptive digital technologies. Second, we contribute to the field of digital transformation research by responding to the call for further research on important moderators within digital transformation and on how multiple strategies work to shape an organization’s financial performance (Verhoef et al. 2021). Finally, our findings provide managers with a practical framework and a set of guidelines to effectively develop and implement digital transformation strategies.