Articles
DOI DOI: 10.62441/actainnovations.vi.651

Does Digital Transformation Increase Firm Value by Standing Out or Slimming Down? The Mediating Role of Competitive Strategy in Indonesian Listed Firms

Dian Perwitasari1, I Made Narsa1, Ardianto1
  1. 1 Universitas Airlangga

Abstract

This study examines the valuation implications of digital transformation as an emerging corporate innovation in an emerging-market context. In particular, it explores the viability and effectiveness of cost leadership vs differentiation as a more robust strategy by which digital transformation transfers into firm value. Utilizing panel data regression and mediation analysis of 2,478 firm-year observations of firm listed on the Indonesia Stock Exchange from 2020 to 2024, this research analyses the direct and indirect relationship between digital transformation firm value. Certainly, it is no surprise that digital transformation enhances firm value — capital markets assign higher values to companies with greater levels of digital engagement. Even more importantly, differentiation proves to be a more potent mediating mechanism than cost leadership, showing that the value created by digital transformation is greater when the process supports innovativeness, uniqueness, customer responsiveness, and the firm’s competitive posture, in addition to cost effectiveness. Extending the analysis reveals that the impact of valuation is particularly significant for small and medium-sized enterprises (SMEs), which have developed greater agility and a more rapid adoption of digital tools. This research adds to the corporate finance literature by explaining how digital transformation capitalization is reflected in market valuation through competitive strategy channels. The results have concrete implications for firms and decision-makers seeking to match digital efforts with value enhancement.

How to Cite

Perwitasari, D., Narsa, I. M., & Ardianto, A. (2026). Does Digital Transformation Increase Firm Value by Standing Out or Slimming Down? The Mediating Role of Competitive Strategy in Indonesian Listed Firms. ACTA INNOVATIONS, 61, 178–192. https://doi.org/10.62441/actainnovations.vi.651
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