Does Digital Orientation Enhance Firm Performance?

Abstract

This research examines the effect of digital orientation on firm performance within the framework of organizational orientation theory. Focusing on a sample of Malaysian listed companies from 2012 to 2019, we employed robust panel regression alongside dynamic generalized method of moments panel and panel quantile regression models as supplementary analyses. The digital orientation was evaluated using Python-based text analysis. Surprisingly, our findings challenge conventional wisdom: Contrary to expectations, digital orientation exhibited no significant influence on firm performance metrics such as returns on assets, returns on equity and Tobin’s Q. This contradicts organizational orientation theory, suggesting that transitioning towards digitalization might not inherently enhance performance. Our study argues that adopting digitalized business practices may not ensure improved firm performance, particularly in emerging economies like Malaysia.