Too much of a good thing? Digitalisation breadth, performance and organisational skills

Abstract

This study investigates the relationship between digitalisation breadth —defined as the number of different digital technologies adopted by a firm – and firm performance. Drawing on the knowledge-based view of the firm we propose an inverted U-shaped relationship: while digitalisation can enhance efficiency and effectiveness, excessive breadth may generate escalating costs due to greater knowledge integration efforts and potential disruption to existing processes. Using the lens of absorptive capacity, we further propose that organisational skills moderate this relationship by mitigating the performance drawbacks associated with high levels of digitalisation breadth. Using data from the Flash Eurobarometer 486 survey, we find support for our hypotheses. Our findings contribute to the digital transformation literature by theorising and demonstrating a non-linear association between digitalisation breadth and firm performance, identifying organisational skills as a key contingency, and highlighting the importance of examining technology adoption in conjunction with complementary organisational resources.