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Abstract
This paper provides empirical evidence for leveraging digitalization to improve firms’ financial performance by implementing servitization as a mediating mechanism, as well as clarifying boundary conditions for the mechanism to work. For that purpose, this paper develops the moderated mediation model using a dataset including 370 manufacturing companies in the central China. The findings indicate that servitization partially mediates the relationship between digitalization and firms’ financial performance, and the mediating effects are moderated by the transformation context. A higher level of organizational risk taking tolerance (ORTT) enhances the indirect effect of digitalization on performance in general. For advanced services, stronger network capabilities lead to greater indirect effects of digitalization on performance. However, such a moderating effect has not been observed for basic services. This paper sheds light on the dual paradoxical view of digitalization and servitization on firms’ financial performance. Albeit challenges around the dual paradox, firms can still derive financial benefits with an appropriate transformation context focussing on ORTT and network capability (NC).
Data availability statement
The data that support the findings of this study are available from the corresponding author upon reasonable request.
Acknowledgements
The authors also would like to thank the editors and anonymous reviewers for their insightful comments.
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Notes on contributors
Zhibo Yang
Dr. Zhibo Yang is an Associate Professor at the Business School, Shanghai Dianji University. Before that, he was a Research Fellow at Henan Academy of Social Sciences. His research focuses on digital economy and industrial policy.
Yufeng Zhang
Professor Yufeng Zhang is a Professor of Operations Management at Birmingham Business School, the University of Birmingham. Yufeng’s work aims to help companies cope with complex challenges and opportunities in managing global network operations with a primary focus on sustainability, digitalization, and engineering innovation. He is Head of the Department of Management, Senior Fellow of the Higher Education Academy (SFHEA), and Fellow of the Alan Turing Institute.
Tao Zhang
Dr. Tao Zhang is a Reader in Innovation and Entrepreneurship at Loughborough University London. Tao’s research focuses on technology policy, innovation management, and energy, standing at the intersection of innovation and sustainability. He primarily examines technology user behaviour, technological change, and innovation management. He has published in Information Systems Journal, the Journal of Product Innovation Management, Annals of Tourism Research, Technological Forecasting and Social Change, Business Strategy, and the Environment, International Business Review, the Journal of Environmental Management, Applied Energy, Energy Economics, etc.