Unraveling the performance puzzle of digital transformation: The moderating role of TMT heterogeneity and faultline strength

Kui Wang, Junjia He, Xiaodan Zhang, Diandian Xiang and Ping Zhang

Journal of Business Research, 2025, vol. 188, issue C

Abstract: Despite the proven advantages of cutting costs and boosting efficiency through digital transformation (DT), the empirical findings about the relationship between DT and financial performance remain ambiguous. This study attempts to reveal boundary conditions under which DT influences firm performance by examining how two top management team (TMT) characteristics—TMT heterogeneity and TMT faultline strength—moderate this relationship. Using panel data from A-share listed companies in China, the results reveal that DT positively impacts financial performance. However, TMT heterogeneity and TMT faultline strength have negative moderating effects on the relationship between DT and firm performance. Moreover, when heterogeneity creates strong faultline within the TMT, it strengthens the weakening role of heterogeneity on the effectiveness of DT implementation. These findings contribute to existing literature on DT implementation by exploring the role of TMT characteristics and provide valuable insights for managers and policymakers seeking to leverage digital transformation strategically.

Keywords: Digital transformation; Firm financial performance; TMT heterogeneity; TMT faultline strength (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:188:y:2025:i:c:s0148296324005800

DOI: 10.1016/j.jbusres.2024.115076

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