Digital transformation, competitive strategy choices and firm value: evidence from China

Abstract

Purpose

This research aims to examine the effects of corporate digital transformation on firm value, with a particular focus on the mediating roles played by cost leadership and differentiation strategies.

Design/methodology/approach

This study employs word frequency analysis to create corporate digital transformation indicators and determine how corporate digital transformation impacts firm value. The data used in the analysis comes from 2,056 listed manufacturing enterprises in China between 2010 and 2019.

Findings

This study demonstrates that digital transformation has a favorable impact on firm value, and that cost leadership strategy and differentiation strategy significantly mediate the relationship between both of them.

Research limitations/implications

This study utilized word frequency analysis to assess the state of corporate digital transformation. It lacked a more thorough description of internal production processes, operational efficiency, and the pace of digital transformation.

Practical implications

The results of this study can not only promote the digital transformation and firm value, but also provide a theoretical basis for enterprises to choose a reasonable competitive strategy in the digital transformation.

Originality/value

This study contributes significantly to the field of firm value research by including digital transformation as a fundamental component. Furthermore, it investigates how cost leadership strategy and differentiation strategy play mediating roles, providing a new perspective and explanatory mechanism for understanding the influence of digital transformation on firm value.

Citation

Ren, C. and Lin, X. (2024), "Digital transformation, competitive strategy choices and firm value: evidence from China", Industrial Management & Data Systems, Vol. 124 No. 4, pp. 1656-1676. https://doi.org/10.1108/IMDS-03-2023-0172