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The impact of enterprise digital transformation on operational flexibility

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  • Sang, Yeming
  • Huang, Rui

Abstract

This study empirically investigates the impact of digital transformation on operational flexibility using data from A-share listed enterprises in China from 2010 to 2022. Digital transformation is measured by the frequency of digital-related keywords in annual reports, while operational flexibility is proxied by operating leverage, employee retention rate, and cash flow volatility. The results reveal a significant negative relationship between the level of digital transformation and operational flexibility. These findings remain robust after employing a Difference-in-Differences (DID) model and instrumental variable (IV) approach. Mediation analysis indicates that R&D investment plays a partial mediating role in this relationship. Further moderation analysis shows that the negative effect is more significant among state-owned and long-established enterprises. This study contributes to the theoretical understanding of the consequences of digital transformation and offers practical implications for corporate strategy and policy design.

Suggested Citation

  • Sang, Yeming & Huang, Rui, 2025. "The impact of enterprise digital transformation on operational flexibility," Finance Research Letters, Elsevier, vol. 86(PD).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pd:s1544612325018884
    DOI: 10.1016/j.frl.2025.108634
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    References listed on IDEAS

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