Digital transformation and the three main types of business activities: a holistic view under the smart machine theory

Authors:
Publisher website
Google Scholar
Abstract
Purpose: Drawing on the Smart Machine theory, we delve into the mechanisms underlying the relationship between digital technologies and enterprise operating, investing, and financing activities. Subsequently, we propose a holistic framework that captures how digital transformation affects enterprises in a dynamic and interconnected manner. This framework conjectures that digital transformation automates and informates business processes to deliver informational and risk management benefits, thereby leading to synergistic outcomes in enterprise activities. Design/methodology/approach: Using data from listed Chinese enterprises from 2007 to 2020, we construct a digital transformation index and explore whether and how digital transformation influences enterprise operating, investing, and financing activities. Our analyses control for enterprise-level characteristics and unobserved heterogeneity at the firm and year levels. Findings: By increasing information transparency and digitalization, digital transformation supports the accumulation of intangible intellectual capital and reduces the level of tangible assets. Then, digital transformation interacts with accumulated intellectual assets to support long-term investment growth through improved analytics and risk management. To support long-term investments, digital transformation promotes speculative financing and curbs Ponzi financing through improved forecasting and risk management. Ultimately, digital transformation improves financial and operational performance through its synergistic influence. Originality/value: We enrich prior literature by proposing a holistic framework to capture the dynamic and interconnected influence of digital transformation on enterprise activities. This framework presents a more complete picture of how digital transformation enhances information and risk management to improve enterprise performance.

This publication has 85 references indexed in Scilit: