The impact of management power on digital transformation

Digital transformation is crucial for companies to stay competitive in the modern business landscape. However, many organizations face obstacles such as organizational inertia, lack of unified transformation cognition, and weak top leadership. In this context, this study explores the impact of management power on digital transformation, based on the approach-inhibition theory of power. The study focuses on Chinese listed companies in Shanghai and Shenzhen A-share manufacturing industries from 2010 to 2020. The study reveals that concentrated equity weakens management’s power stability, constrains their residual control, suppresses power, and undermines the effect of management’s power level on driving corporate digital transformation. Furthermore, the study finds that supervision mechanisms have a positive impact on management power. Specifically, the external audit system proves to be an effective regulatory mechanism, while the independent director system appears somewhat formalistic and lacks effectiveness in promoting digital transformation. This study contributes to the micro-foundations of corporate-level behavior, deepening our understanding of management power and providing guidance for digital transformation practices in corporations. By shedding light on the role of management power in digital transformation, this study highlights the need for companies to cultivate strong and stable leadership, ensure equity distribution, and establish effective supervision mechanisms to facilitate successful digital transformation.