Publication Date

8-26-2021

Document Type

Article

Department

Global Innovation and Leadership

Disciplines

Business Administration, Management, and Operations | Business Analytics

Publication Title

Management Decision

DOI

10.1108/MD-01-2021-0117

Abstract

Purpose

Prior research has found that firms' adoption of digital technologies (i.e. digitalization) enhances transaction efficiency and improves firm performance. However, this finding is based on the assumption that firms respond to consumers' adoption of digital technology (market digitalization) in a timely fashion. The study investigates the impact of market digitalization on firm performance in Latin America, where resistance to change is often higher, despite the positive impact on performance when companies respond to the environmental shock of digitalization by restructuring.

Design/methodology/approach

Using data from seven Latin American countries from 1997 to 2018 (Argentina, Brazil, Chile, Colombia, Peru, Venezuela and Mexico), fixed-effects panel regression robustly supports the results.

Findings

Most Latin American firms fail to capitalize on the benefits of market digitalization, and their performance declines as a result. The authors extend research on digitalization by incorporating theoretical insights from the restructuring literature, finding that implementing a substantial restructuring strategy is a viable way to overcome market digitalization.

Originality/value

The authors demonstrate that the digitalization–firm performance relationship is more complex than has been described in studies using samples from developed economies. The authors establish restructuring as an effective adaptation strategy in Latin America, although the institutional environment's characteristics may constrain or discourage firms from adopting it.

Keywords

Business portfolio restructuring, Digitalization, Firm performance, Latin America

Comments

This author accepted manuscript is deposited under a Creative Commons Attribution Non-commercial 4.0 International (CC BY-NC) licence. This means that anyone may distribute, adapt, and build upon the work for non-commercial purposes, subject to full attribution. If you wish to use this manuscript for commercial purposes, please contact permissions@emerald.com.

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial 4.0 License

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