How does performance feedback enable enterprise digital transformation? Explicating the role of institutional pressures

Purpose – The growing literature on enterprise digital transformation (DT) has paid limited attention to performance feedback and, in particular, has largely neglected the institutionalization of DT. This study aims to integrate the behavioral theory of the firm (BTOF) and neo-institutional theory to explore the impact of performance feedback on DT and the moderating role of institutional pressures. Design/methodology/approach – This study uses panel data from 1, 914 Chinese listed firms from 2007 to 2020. This paper conducts regression analysis using Stata 18.0 software. Moreover, this paper uses a combination of fixed effects regression models and the instrumental variable method. Findings – Performance above aspiration exhibits a U-shaped relationship with DT, whereas performance below aspiration demonstrates an inverted U-shaped relationship. Moreover, normative pressure from media coverage flattens both the U-shaped and inverted U-shaped relationships, while mimetic pressure from peer firms steepens these relationships. Originality/value – By incorporating neo-institutional theory, this study enriches BTOF by highlighting the institutional conditions under which performance feedback affects DT at the firm level. It also contributes to neo-institutional theory by differentiating the roles of normative and mimetic pressures arising from the institutionalization of DT.