Organizational resilience under COVID-19: the role of digital technology in R&D investment and performance
| DOI | https://doi.org/10.1108/IMDS-04-2022-0220 |
| Published date | 22 November 2022 |
| Date | 22 November 2022 |
| Pages | 41-63 |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
| Author | Feiyang Guan,Wang Tienan,Liqing Tang |
Organizational resilience under
COVID-19: the role of digital
technology in R&D investment
and performance
Feiyang Guan, Wang Tienan and Liqing Tang
Harbin Institute of Technology, Harbin, China
Abstract
Purpose–This study aims at the sudden outbreak of COVID-19, which had an unprecedented negative impact
on the Chinese economy, with firms being affected most. Firms differ in terms of their specific internal
environment, shaping their ability to respond to the outbreak, so the impact may also vary.
Design/methodology/approach –In this paper Chinese listed firms are selected as samples to investigate
the mediating effect of prior digital technology on the relationship between R&D (research and development)
investment (funds and staff) and firm performance during the epidemic. Firm size and diversification are then
introduced as moderating variables to explore the conditional mediating effect of digital technology.
Findings –The results indicate that the higher the firm’s prior R&D investment, the higher its digital
technology level, and thus the stronger its resistance to the epidemic. Moreover, compared with large-scale
firms, small-scale firms have the advantage of strategic flexibility to technological changes, which can help
them accumulate experience from R&D activities for digital transformation, thus attenuating the negative
impact of the COVID-19 on firm performance. Finally, the results also show that digital technology mediates
more strongly between R&D investment and firm performance in diversified firms than in centralized firms.
Originality/value –The study builds a mediation model to reveal the process mechanism through which
R&D investment affects firm performance via digital technology. Firm size and diversification are then
innovatively introduced as situational factors to build the moderated mediation model, which opens up a new
perspective for understanding the effect of firm internal factors on the relationship between R&D investment,
digital transformation and firm performance.
Keywords COVID-19, R&D funds, R&D staff, Digital technology, Firm size, Diversification
Paper type Research paper
1. Introduction
At the beginning of 2020, the sudden outbreak of COVID-19 had an unprecedented negative
impact on society and the economy. The growth rate of industrial firms above the scale
dropped sharply in March 2020 (Chen and Yu, 2020). Declining orders, restricted production,
understaffing, excessive fixed cost burdens, supply chain disruptions and potential credit
and debt risks hit firms very hard. However, the epidemic affected different types of firms
differently. Some firms benefited from previous high R&D (research and development)
investment intensity and gradually started their digital transformation when emerging
technologies such as big data, cloud computing, the Internet of things, blockchain, artificial
intelligence and 5G communication emerged (Brammer et al., 2020;Huang et al., 2020). As a
result, those firms with high digitization were more resilient when the COVID-19 epidemic
The role
of digital
technology
41
The author thanks the National Natural Science Foundation of China for their support. The author also
thanks the two anonymous reviewers and editor who provided helpful and constructive comments that
improved the manuscript substantially.
Funding: This work was supported by National Natural Science Foundation of China [Grant numbers
N71972061, N72172043].
Declaration of interest: The authors declare that they have no known competing financial interests or
personal relationships that could have appeared to influence the work reported in this paper.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0263-5577.htm
Received 12 April 2022
Revised 27 June 2022
16 August 2022
6 September 2022
27 September 2022
Accepted 20 October 2022
Industrial Management & Data
Systems
Vol. 123 No. 1, 2023
pp. 41-63
© Emerald Publishing Limited
0263-5577
DOI 10.1108/IMDS-04-2022-0220
occurred (Bernot et al., 2021). Digital technologies such as telecommuting, smart factories and
digital workshops have become an advantage for some firms in traditional industries to resist
the epidemic (Ai et al., 2022). For example, although 30% of the employees in the Chinese firm
Kainan Health were unable to return to work during the epidemic, the order volume was still
unaffected due to its smart factory. In addition, Baosteel’s Shanghai Baoshan base in China,
known as the “lighthouse factory,”has also shown unique advantages in this epidemic. Most
existing studies have explored the advantages brought by digital technology to firms during
COVID-19 from a theoretical or case perspective. To fill the gap from the empirical
perspective, we utilize a sample of 7,389 listed companies in China to conduct an empirical
study to ensure the objectivity and accuracy of our findings.
As they faced COVID-19, it became very urgent for firms to enhance their resilience to cope
with difficulties and complete production. Kantur and Iseri-Say, 2013 argue that the conceptof
organizational resilience is complex and includes multiple dimensions, while also crossing
different levels. One is a dynamic concept, and the other is static. The dynamic concept primarily
considers organizational resilience as the process dynamically managing and redefining
organizational resilience. The static concept defines the organization as a desirable trait and
advocates redefining organizational resilience from different perspectives, such as desirable
traits and response outcomes. Thus, firms that showed excellent performance during the
epidemic will invariably have organizational resilience in the digital era. Some scholars have
pointed out that organizational resilience in the digital era involves two aspects: first, the ability
of an organization to withstand challenges and to use digital means to restore its original state or
function; and second, the ability to transcend its orig inal situation and use digital technology to
improveand become strongerin the face ofadversity (He et al., 2022;Xie et al.,2022).The former
is about the short-term survival of the firm, and the latter determines its long-term development.
We thusidentify the degreeof developmentof digital technology as an external manifestation of
organizational resilience under COVID-19. It is further suggested that firms with more advanced
digital technology are more resilient to COVID-19 –that is, they will perform better.
Most studies have explored the factors influencing firm digital transformation in terms of
technology, capabilities, management and policies. For example, Machado et al. (2022)
identified technologies influencing firm digital transformation such as big data and smart
data, cloud computing, social media, predictive and prescriptive analytics, the internet of
Things, robotics, 3D printing and mobile technology. Some scholars have also argued that
firms need a combination of capabilities to achieve digital transformation (Ellstrom et al.,
2022). Wrede et al. (2020) have pointed out that business managers must be aware of the
barriers and opportunities of digital transformation. Some scholars have also considered
external pressures and government policies as environmental factors influencing the process
of digital transformations (Aboelmaged, 2014;Tao et al., 2018). However, this literature
ignores the impact of R&D investment on digital transformation. R&D investment activities
are the source of organizational learning and enhanced technological capabilities (Kane and
Alavi, 2007). Thus, we consider that organizational learning ability and technical capabilities
facilitate firms’integration of digital technology resources and equip a firm with the digital
technologies best suited to its current environment. For example, we find that the rich R&D
input activities of China Baosteel’s Shanghai Baoshan base have given the firm experience in
embedding digital technologies (Zhang et al., 2021), which has helped it operate 24 h a day
during the epidemic without multiple employees. Based on the above, this research first
focuses on the impact of the accumulation of prior R&D investment activities on digital
transformation, as well as the strategic flexibility of firms with high digital technologies,
which can help firms withstand COVID-19 and show great performance; to date, this has been
neglected in the influencing factors discussed in the digital transformation literature.
The process of R&D investment activities affecting digital transformation will also be
affectedby many external environmentalfactors. Therefore,we further explore whichscenario
IMDS
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