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The deep integration between digital technology and the real economy (i.e., digital transformation) has become a major trend given the historical intersection of the new round of technological revolution. Digital transformation is the transformation undergone by firms that adopt digital technologies to create more value for the firm (Dehning et al., 2003; Tijan et al., 2021; Xie et al., 2022). Because successful digital transformation brings firms significant benefits such as increased agility, profit, and improvement in the services offered, many firms initiate digital transformation to achieve competitive advantage (Philippart, 2022; Sultana et al., 2021). According to the statistical data of the 2021 research on digital transformation index of Chinese enterprises released by Accenture, the average digital score has increased from 37 points in 2018 to 54 points in 2021 (based on the full score of 100 for the ideal digital enterprise in the future), with the proportion of Chinese firms having remarkable results in digital transformation significantly increasing from 7% in 2018 to 16% in 2021, indicating that the overall level of digital transformation of Chinese firms has seen steady improvements (Kong et al., 2022). Given the infinite possibilities and the significant benefits of digital transformation, digital transformation has become an important and promising topic in the information management field (Philippart, 2022; Sultana et al., 2021).
According to prior research, scholars have argued that digital transformation helps firms to be more competitive (Ferreira et al., 2019; Singh et al., 2021; Llopis-Albert et al., 2021). They discuss the relationship between digital transformation and firm performance from different perspectives, including information technology (IT) capabilities and organizational agility, thus making theoretical contributions to the digital transformation literature (Chouaibi et al., 2022; Nwankpa & Roumani, 2016). Although insightful conclusions have been made, prior literature focuses on the internal capabilities and resources of firms, leaving the role of external factors, especially users, underexplored. Users are those that use a firm’s product and own the most relevant information and knowledge on the firm’s products (Chatterji & Fabrizio, 2014). Moreover, in the digital age, information technologies empower users such that the distinctions between users and firms are blurred (Prahalad & Ramaswamy, 2000). Users can participate in the production, design, and other projects to help firms improve their business. As such, user participation, which captures a firm’s interaction with users to co-construct the offering (Ngo & O'Cass, 2013), has become one of the most important ways to increase firms’ competitiveness (Rayna & Striukova, 2021). Thus, exploring digital transformation from a user participation perspective and finding out how digital transformation promotes firm performance through user participation are valuable undertakings.
In our study, we examined the relationship between digital transformation and firm performance via a lens of user participation. Because digital transformation makes knowledge more reachable (Dehning et al., 2003) and user participation provides an important source of knowledge for all firms (Abrell et al., 2016), we developed our research framework based on the knowledge-based view (KBV) (Grant, 1996) in which we propose that digital transformation promotes firm performance through the mediation role of user participation. We also propose two moderators, environmental dynamics and absorptive capacity (Cohen & Levinthal, 1990; Sun et al., 2020), to moderate the relationship between user participation and firm performance because the two variables affect firms’ information and knowledge obtaining, and they are thus relevant.