Firm Digitalization and Corporate Performance: The Moderating Effects of Organizational Capital

Abstract

This thesis examines the interplay between digital transformation and corporate performance with a special emphasis on the moderating effect of organizational capital. Utilizing textual analysis of 10-K reports, a Digital Transformation Score (DGS) is established, which quantifies the extent of a firm's digital activities. The analysis reveals that digital transformation, as represented by the DGS, is positively associated with corporate value. Furthermore, this study identifies organizational capital as a pivotal element in harnessing the value of digital initiatives. The study revolves around a unique dataset of U.S. non-technology firms, providing a novel perspective on the digitalization discourse. The findings highlight that not only is digital transformation conducive to enhanced corporate performance, as measured by Tobin’s Q, but it also synergizes with high- quality organizational capital to further enhance corporate value. The evidence also suggests that governance quality, such as higher institutional ownership and superior information quality, underlines the benefits derived from digital transformation. This study contributes to digitalization research by exploring how digital transformation drives corporate performance and defining organizational capital's pivotal role. It delivers insights for both industry and academia, stressing the importance of blending digital strategies with organizational capital, and high information quality in today's digital arena. For professionals, the research offers solid evidence of the need to develop organizational capital to enhance the benefits of digital initiatives. For scholars, it offers novel insights and opens new research avenues, particularly focusing on non-technology firms in the U.S., a sector relatively underexplored in digitalization studies, thereby enriching the understanding of digitalization's impact across diverse business domains.