It depends on the size: How firm strategic emphasis on digital transformation predicts market capitalization

Whereas digital businesses can have an enormous market value, it remains an open question, whether firms, embarking on a digital transformation journey, can realize similar benefits. Thus, we rely on the signaling theory to study, whether strategic emphasis on digital transformation - i.e., the extent, to which a firm focuses on digital transformation in its strategy - as well as firm size as an indicator of a large resource basis jointly influence market capitalization. To answer this question, we conducted a longitudinal panel data analysis of the largest German publicly listed companies from 2000 to 2017. Our results show, that strategic emphasis on digital transformation leads to a higher market capitalization for larger firms and to a lower market capitalization for smaller firms. Whereas larger firms should further disclose their strategic emphasis on digital transformation, smaller firms should consider sending additional signals to investors, demonstrating their ability to undergo digital transformation successfully.