Influence of top management team faultlines on corporate digitalization

Abstract

Purpose This study aims to explore whether top management team (TMT) faultlines affect corporate digitalization and what the impact mechanism is, thus effectively promoting the digital transformation of enterprises from the perspective of optimizing TMT structure. Design/methodology/approach This study sampled companies that were listed in China between 2011 and 2020. Using the two-way fixed effect model, it empirically tests the impact of TMT faultlines on the digital transformation of enterprises. Findings TMT task-related faultline significantly positively impacts enterprise digital transformation, while the bio-demographic faultline has a significant negative effect. The regulatory role played by Chief Executive Officer (CEO) power intensity in the relationship between the bio-demographic faultline and digital transformation is a negative one. The above relationship is strongly influenced by industry technical sophistication, corporate location and listing board. Research limitations/implications The research has promoted the development of the upper echelons theory in the context of digitalization. Moreover, it enlightens the research of digital transformation’s influencing factors and mechanisms. However, no suitable mediating variable was found. Practical implications This research has significant implications for managers to optimize the internal structure of the TMT according to different enterprises’ business strategies in order to establish an efficient management team. Originality/value This study provides a new theoretical framework for TMT’s role in enterprise digital transformation. Further, it makes a beneficial exploration of the boundary and situational conditions of their relationship.