Business group affiliation and corporate digital transformation

Abstract

This study explores how business group affiliation (BGA) affects corporate digital transformation (DT), addressing the gap in the DT literature that generally treats firms as independent entities while neglecting the potential impact of their organizational structure. Utilizing data from Chinese privately owned listed firms from 2010 to 2020, we find that BGA has a negative impact on corporate DT, with a less pronounced effect in firms facing lower industry competition and firms with stronger corporate governance. Mechanism analyses show that BGA undermines firms' DT by reducing their risk-taking and exacerbating expropriation by ultimate controllers. Finally, we find that the negative impact of BGA on corporate DT significantly reduces firms' future performance. Overall, our study enhances the understanding of the determinants of corporate DT and provides firms with useful insights for navigating DT initiatives in today's fast-changing digital world.