Does market digitalization always benefit firms? The Latin American case
ISSN: 0025-1747
Article publication date: 26 August 2021
Issue publication date: 19 July 2022
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
Citation
Sanchez-Riofrio, A.M., Lupton, N.C. and Rodríguez-Vásquez, J.G. (2022), "Does market digitalization always benefit firms? The Latin American case", Management Decision, Vol. 60 No. 7, pp. 1905-1921. https://doi.org/10.1108/MD-01-2021-0117
Publisher
:Emerald Publishing Limited
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