The role of digital transformation practices in the operations improvement in manufacturing firms: A practice-based view

Abstract

Digitalization has become increasingly crucial for manufacturing firms to optimize their production processes and improve operations management. However, the role of digital transformation practices in firms' operations improvement is still debated in the extant research. Moreover, there is little quantitative research on analyzing their associations using large data sets. Therefore, a theoretical framework is developed in this study based on a practice-based view (PBV) to demonstrate the relationships between digital transformation practices and firms' operational efficiency from three aspects of workforce productivity, physical asset efficiency, and working capital efficiency. Then, the role of industry competition in their relationships is examined. Besides, digital transformation practices are measured using the text analysis method targeting authoritative annual reports to enhance the objectivity and applicability of our quantitative studies. With a large sample of Chinese manufacturing firms from 2016 to 2020, a fixed-effect model is employed to reveal that digital transformation practices have significant and positive impacts on all three aspects of firms’ operational efficiency. It is further observed that industry competition weakens these positive associations. This study enriches the digitalization literature in operations management and expands the application of PBV by verifying the differentiated relationships between digital transformation practices and operational efficiency at different levels of competition. Furthermore, it provides significant practical implications for both managers and policy-makers to appropriately implement and popularize digital transformation practices under an external competitive context.