Digital is Strategy: The Role of Digital Technology Adoption in Strategy Renewal

Nicolas van Zeebroeck, Tobias Kretschmer and Jacques Bughin

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: As digital technologies emerge and improve rapidly, firms face changing tradeoffs in terms of their technology infrastructure and strategic direction. Hence, many of them adopt new digital technology and develop new business models and strategies. The literature on strategic alignment of IT suggests that firms need to synchronize these different domains of choice. We therefore, ask how far firms renew their strategy as they adopt new technologies. In this article, we study this question empirically by assessing if the adoption of new digital technologies is associated with, or even leads to, changes to firm strategy using a detailed survey-based dataset on firms’ strategy renewal and their adoption of digital technologies. We observe a strong positive association between the extent of strategy change and the stage of adoption of advanced digital technologies overall, suggesting a tight coupling between (technological) structure and strategy. Further, using instrumental variable regressions to disentangle the two effects, we find that the adoption of new technologies may lead to a large and robust effect on strategy change: the more extensive the adoption, the larger the change in strategy. This result is robust to various specifications and across industries. However, we notice substantial differences across technologies, potentially pointing at heterogeneity in their strategic nature or maturity level.

Keywords: Cognition; Companies; Digital strategy; digital transformation; Industries; Insurance; Mobile applications; Space exploration; Steady-state; strategic organization design (SOD); strategic renewal; technology adoption (search for similar items in EconPapers)
Date: 2021-06-11
New Economics Papers: this item is included in nep-bec, nep-cse and nep-tid
Note: SCOPUS: ar.j
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published in: IEEE transactions on engineering management (2021),p.1-15

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