ABSTRACT Research Question/Issue This study examines how organizational structures adapt to digital technologies in the digital age. Many nontechnology firms are undergoing transformations driven by data‐driven digital technologies. However, their existing structures often fail to accommodate these changes, thus prompting a need for strategic adaptation to integrate these technologies into business operations. Specifically, we propose that digitalization facilitates decentralized power in governance structures. Research Findings/Insights To better capture how digitalization influences governance structure, we focus on the adoption of digital technologies and apply multiple measures of digitalization to examine its impact on the empowerment of subsidiaries by parent firms. Using public data from China's listed companies between 2009 and 2020, we find that firms with higher levels of digitalization tend to decentralize decision‐making authority to their subsidiaries. Moderation tests indicate that this effect is more pronounced for companies with greater business diversification and those operating in environments of higher uncertainty, highlighting the role of digital technologies in managing task uncertainty and governance costs. Further analysis suggests that this shift in power allocation significantly enhances firm productivity. Theoretical/Academic Implications This study contributes to the growing literature on corporate digitalization by shifting the focus from antecedents and production efficiency to proactive adaptation strategies. By exploring changes in internal power structures and their financial consequences, we offer insights into how digital technologies can drive competitive advantage within firms. Additionally, we contribute to organizational structure theory by positing that digital technologies act as an external contingency for nontech firms, requiring structural decentralization to align with technological shifts. Practitioner/Policy Implications Our findings have implications for both professional managers and shareholders. For nontech firms seeking to enhance operational efficiency through digitalization, they should consider optimizing internal power structures in response to technological shifts, which can improve firm performance.
Chen et al. (Fri,) studied this question.