The inverted-U relationship between innovation performance feedback and digital transformation: evidence from China

Digital transformation has emerged as a critical subject in high-quality strategic change. Innovation performance feedback serves as a crucial catalyst for strategic modification, offering an opportunity to investigate the response mechanism of digital transformation. This study examines the impact of innovation performance feedback on digital transformation by analysing Shanghai and Shenzhen A-share listed companies from 2011 to 2022, focusing on the imitation mechanism of external 'black envy' and 'white envy', as well as internal fault-tolerance and accountability. This study produced conclusions in two distinct scenarios. On the one hand, an inverted-U relationship with digital transformation is observed for innovation performance feedback that is below aspirations. The absorptive capacity and accountability mechanism mediate this relationship. Enterprises characterised by favourable business environments, reduced public attention, and non-growth-oriented strategies demonstrate a more significant influence of innovation performance feedback on digital transformation. On the other hand, an inverted-U relationship with digital transformation is similarly observed for innovation performance feedback that is above aspirations. The absorptive capacity and fault-tolerance mechanism mediate this relationship. Non-growth-oriented enterprises exhibit a more significant influence of innovation performance feedback on digital transformation.