Pinpoint the Golden Point: A Moderated Inverted-U Relationship Between Digital Transformation and Business Model Innovation

Abstract

Despite the growing consensus on the positive value of digital transformation (DT) to business model innovation, there remains a lack of a comprehensive understanding about whether this positive influence can be sustainable. Drawing on the corporate behavioral theory and prospect theory, we examine a combination of dual impact mechanisms of DT on business model innovation, emphasizing the moderating role of aspiration performance gaps (APGs). Using a sample of A-share listed firms in China from 2013 to 2022, we show the dark sides of DT and disclose that DT has an inverted U-shaped relationship with business model innovation. Notably, negative APGs exert a stronger moderating effect than positive APGs, accelerating the attainment of peak business model innovation at a lower degree of DT. We also highlight that the inverted U-shaped relationship shows a lower turning point and a larger opening in the Eastern region compared with that in the whole region; large firms tend to experience the shift from the “bright sides” to the “dark sides” earlier than SMEs. This study clarifies the intrinsic mechanisms between DT and business model innovation, offering practical guidance to avoid the pain points of DT and achieve business model innovation.