It Depends on the Size: How Firm Strategic Emphasis on Digital Transformation Predicts Market Capitalization

Abstract

Whereas digital businesses can have an enormous market value, it remains an open question, whetherfirms, embarking on a digital transformation journey, can realize similar benefits. Thus, we rely on the signaling theory to study, whether strategic emphasis on digital transformation -i.e., the extent, to which a firm focuses on digital transformation in its strategyas well as firm size as an indicator of a large resource basis jointly influence market capitalization. To answer this question, we conducted a longitudinal panel data analysis of the largest German publicly listed companies from 2000 to 2017. Our results show, that strategic emphasis on digital transformation leads to a higher market capitalization for larger firms and to a lower market capitalization for smaller firms. Whereas larger firms should further disclose their strategic emphasis on digital transformation, smaller firms should consider sending additional signals to investors, demonstrating their ability to undergo digital transformation successfully.

The role of transformational entrepreneurship in managing a digital platform: the case of Yamamay

“…Finally, further limiting the digitisation process are resources, such as human, information and financial resources (Matt et al, 2015;Sebastian et al, 2017). A typical and very visible indicator of a large resource base is indeed the size of the company (Moker et al, 2020).…”

“…, 2017). A typical and very visible indicator of a large resource base is indeed the size of the company (Moker et al. , 2020).…”

“…Some of the profiles exploring the topic of digital platforms are those associated with entrepreneurship (Srinivasan and Venkatraman, 2018). As is well-known, there is extensive literature on entrepreneurship, ranging from the analysis of behavioural characteristics of founders as necessary factors for starting a new venture or creating new opportunities (Dyer et al, 2008;Moker et al, 2020) to the study of individual entrepreneurial skills (Hitt et al, 2011).…”

“…As is well-known, there is extensive literature on entrepreneurship, ranging from the analysis of behavioural characteristics of founders as necessary factors for starting a new venture or creating new opportunities (Dyer et al. , 2008; Moker et al. , 2020) to the study of individual entrepreneurial skills (Hitt et al.…”

The Strategic Competitiveness of the South African Mining Industry in the Age of the Fourth Industrial Revolution

“…When a company adopts digital transformation technologies, it should create an additional value (such as market capitalisation and price/book value multiples) for the company. Authors such as [76] and [53] have considered company value to be one of the critical dimensions in measuring the success of digital transformation.…”