Digital transformation, supplier concentration, and CEO financial experience: Unveiling the dynamics of innovation performance in Chinese firms

Abstract

In the dynamic landscape of rapid change and the pervasive influence of the digital revolution, the discussion surrounding the impact of digital transformation on the innovation performance of firms has become a focal point of intense debate. This paper aims to contribute to the evolution and advancement of traditional organizations toward high-quality development by addressing this issue through the integration of technology into the framework, leveraging the resource-based theory. The study seeks to explore the influence of digital transformation on innovation performance, specifically examining the role of supplier concentration in this relationship. Additionally, we investigate the moderating effect of CEO financial experience on the association between digital transformation and innovation performance. Utilizing multiple regression methodologies and analyzing data from Chinese listed firms spanning the period from 2007 to 2022, our empirical findings reveal a direct positive relationship between digital transformation and innovation performance. Furthermore, the study uncovers an indirect pathway through which digital transformation enhances innovation performance by mitigating supplier concentration. Notably, the positive impact of digital transformation is amplified by a CEO's background in finance. Finally, the effect of digital transformation on innovation performance is particularly pronounced in sectors such as state-owned entities, advanced technology companies, large-scale businesses, and those in their maturity phase. These insights provide valuable contributions to addressing concerns related to digital transformation, particularly in emerging economies like China. The findings offer essential lessons for navigating the transition to Industry 4.0 and fostering sustainable innovative practices. By emphasizing the role of supplier concentration and the moderating influence of CEO financial experience, this research contributes to a nuanced understanding of how digital transformation can positively impact innovation performance across diverse sectors.