Does digital transformation improve the firm’s performance? From the perspective of digitalization paradox and managerial myopia

Abstract

Following the resource-based view and upper echelons theory, we use data on Chinese A-share listed companies from 2013 to 2020 to investigate the effect of digital transformation on total factor productivity and firm performance, as well as the moderating effect of managerial myopia. The results show that digital transformation can significantly increase total factor productivity but decrease firm performance by increasing the operational cost rate, reducing total asset turnover, and increasing management expenses. Managerial myopia can significantly amplify the negative effects of digital transformation. Low- or high-digital transformation is not conducive to firm performance, whereas median-digital transformation can significantly improve firm performance. The more labor-intensive enterprises, the more negative the effect of digital transformation on firm performance. This study enriches and supplements the resource-based view and upper echelons theory and extends the research on the economic consequences of digital transformation based on the context of developing countries.