IDEAS home Printed from https://ideas.repec.org/a/pal/palcom/v11y2024i1d10.1057_s41599-024-03179-y.html
   My bibliography  Save this article

Reducing asymmetric cost behaviors: Evidence from digital innovation

Author

Listed:
  • Xinyi Du

    (Jinan University)

  • Kangqi Jiang

    (Shantou University)

  • Xian Zheng

    (Jinan University)

Abstract

This study quantifies the impact of digital innovation on corporate performance, offering insights into the sustainability of digital innovation’s impact and providing guidance for firms embarking on their digital innovation journey. We examine the effect of digital innovation on cost stickiness using patent reports spanning from 2007 to 2022. The baseline analysis results reveal that digital innovation significantly mitigates cost stickiness in companies. This finding remains robust after addressing endogeneity concerns and conducting various robustness tests. We probe potential mechanisms and discover that digital innovation reduces cost stickiness by enhancing the quality of internal controls, improving resource-adjustment efficiency, and addressing managerial over-optimism. Heterogeneity analysis indicates a more pronounced impact of digital innovation on reducing asymmetric cost behaviors in larger firms, those beyond the growth stage, and in regions with active digital procurement, well-developed digital taxation governance, and sound judiciary infrastructures. Additionally, our expanded analysis confirms the financial benefits of digital innovation in reducing cost stickiness. A notable discovery is the negative correlation between digital transformation and cost stickiness within digitally innovative firms, underscoring the greater significance of digital innovation over mere digitization. Overall, this study significantly advances our understanding of how digital innovation influences cost management strategies.

Suggested Citation

  • Xinyi Du & Kangqi Jiang & Xian Zheng, 2024. "Reducing asymmetric cost behaviors: Evidence from digital innovation," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-18, December.
    • Handle: RePEc:pal:palcom:v:11:y:2024:i:1:d:10.1057_s41599-024-03179-y
    DOI: 10.1057/s41599-024-03179-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41599-024-03179-y
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41599-024-03179-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wanjiao Jia & Ting Yang & Xin Zhang, 2023. "The rise of robots and the fall of cost stickiness: Evidence from Chinese manufacturers," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3147-3171, September.
    2. Chapman, Christopher S. & Kihn, Lili-Anne, 2009. "Information system integration, enabling control and performance," Accounting, Organizations and Society, Elsevier, vol. 34(2), pages 151-169, February.
    3. Anastassia Fedyk & James Hodson & Natalya Khimich & Tatiana Fedyk, 2022. "Is artificial intelligence improving the audit process?," Review of Accounting Studies, Springer, vol. 27(3), pages 938-985, September.
    4. Richard J. Boland & Kalle Lyytinen & Youngjin Yoo, 2007. "Wakes of Innovation in Project Networks: The Case of Digital 3-D Representations in Architecture, Engineering, and Construction," Organization Science, INFORMS, vol. 18(4), pages 631-647, August.
    5. Bok Baik & David B. Farber & Sam (Sunghan) Lee, 2011. "CEO Ability and Management Earnings Forecasts," Contemporary Accounting Research, John Wiley & Sons, vol. 28(5), pages 1645-1668, December.
    6. Chung, Chune Young & Hur, Seok-Kyun & Liu, Chang, 2019. "Institutional investors and cost stickiness: Theory and evidence," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 336-350.
    7. Amankwah-Amoah, Joseph & Khan, Zaheer & Wood, Geoffrey & Knight, Gary, 2021. "COVID-19 and digitalization: The great acceleration," Journal of Business Research, Elsevier, vol. 136(C), pages 602-611.
    8. Itay Kama & Dan Weiss, 2013. "Do Earnings Targets and Managerial Incentives Affect Sticky Costs?," Journal of Accounting Research, Wiley Blackwell, vol. 51(1), pages 201-224, March.
    9. Mark C. Anderson & Rajiv D. Banker & Surya N. Janakiraman, 2003. "Are Selling, General, and Administrative Costs “Sticky”?," Journal of Accounting Research, Wiley Blackwell, vol. 41(1), pages 47-63, March.
    10. Erevelles, Sunil & Fukawa, Nobuyuki & Swayne, Linda, 2016. "Big Data consumer analytics and the transformation of marketing," Journal of Business Research, Elsevier, vol. 69(2), pages 897-904.
    11. Clara Xiaoling Chen & Hai Lu & Theodore Sougiannis, 2012. "The Agency Problem, Corporate Governance, and the Asymmetrical Behavior of Selling, General, and Administrative Costs," Contemporary Accounting Research, John Wiley & Sons, vol. 29(1), pages 252-282, March.
    12. Ida Merete Enholm & Emmanouil Papagiannidis & Patrick Mikalef & John Krogstie, 2022. "Artificial Intelligence and Business Value: a Literature Review," Information Systems Frontiers, Springer, vol. 24(5), pages 1709-1734, October.
    13. Feliciano-Cestero, María M. & Ameen, Nisreen & Kotabe, Masaaki & Paul, Justin & Signoret, Mario, 2023. "Is digital transformation threatened? A systematic literature review of the factors influencing firms’ digital transformation and internationalization," Journal of Business Research, Elsevier, vol. 157(C).
    14. Lorenzo Ardito, 2023. "The influence of firm digitalization on sustainable innovation performance and the moderating role of corporate sustainability practices: An empirical investigation," Business Strategy and the Environment, Wiley Blackwell, vol. 32(8), pages 5252-5272, December.
    15. Chen, Zhongfei & Jiang, Kangqi, 2024. "Digitalization and corporate investment efficiency: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    16. Chen, Yufeng & Xu, Jing, 2023. "Digital transformation and firm cost stickiness: Evidence from China," Finance Research Letters, Elsevier, vol. 52(C).
    17. Ayed Mouelhi, Rim Ben, 2009. "Impact of the adoption of information and communication technologies on firm efficiency in the Tunisian manufacturing sector," Economic Modelling, Elsevier, vol. 26(5), pages 961-967, September.
    18. Dai, Jing & Hu, Nan & Huang, Rong & Yan, Yan, 2023. "How does credit risk affect cost management strategies? Evidence on the initiation of credit default swap and sticky cost behavior," Journal of Corporate Finance, Elsevier, vol. 80(C).
    19. Xin, Xianyang & Wong, Jin Boon & Hasan, Mostafa Monzur, 2021. "Stakeholder orientation and cost stickiness," Journal of Behavioral and Experimental Finance, Elsevier, vol. 32(C).
    20. Hilary, Gilles & Hsu, Charles & Segal, Benjamin & Wang, Rencheng, 2016. "The bright side of managerial over-optimism," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 46-64.
    21. Verhoef, Peter C. & Broekhuizen, Thijs & Bart, Yakov & Bhattacharya, Abhi & Qi Dong, John & Fabian, Nicolai & Haenlein, Michael, 2021. "Digital transformation: A multidisciplinary reflection and research agenda," Journal of Business Research, Elsevier, vol. 122(C), pages 889-901.
    22. Ha, Le Thanh, 2022. "Effects of digitalization on financialization: Empirical evidence from European countries," Technology in Society, Elsevier, vol. 68(C).
    23. Graham, John R. & Harvey, Campbell R. & Puri, Manju, 2013. "Managerial attitudes and corporate actions," Journal of Financial Economics, Elsevier, vol. 109(1), pages 103-121.
    24. Christopher S. Armstrong & Alan D. Jagolinzer & David F. Larcker, 2010. "Chief Executive Officer Equity Incentives and Accounting Irregularities," Journal of Accounting Research, Wiley Blackwell, vol. 48(2), pages 225-271, May.
    25. Ferreira, João J.M. & Fernandes, Cristina I. & Ferreira, Fernando A.F., 2019. "To be or not to be digital, that is the question: Firm innovation and performance," Journal of Business Research, Elsevier, vol. 101(C), pages 583-590.
    26. Jason V. Chen & Itay Kama & Reuven Lehavy, 2019. "A contextual analysis of the impact of managerial expectations on asymmetric cost behavior," Review of Accounting Studies, Springer, vol. 24(2), pages 665-693, June.
    27. Wang, Lei & Chen, Yangyang & Ramsey, Thomas Stephen & Hewings, Geoffrey J.D., 2021. "Will researching digital technology really empower green development?," Technology in Society, Elsevier, vol. 66(C).
    28. Li, Jianjun & Wang, Xuan & Wu, Yaping, 2020. "Can government improve tax compliance by adopting advanced information technology? Evidence from the Golden Tax Project III in China," Economic Modelling, Elsevier, vol. 93(C), pages 384-397.
    29. Lily H. Fang & Josh Lerner & Chaopeng Wu, 2017. "Intellectual Property Rights Protection, Ownership, and Innovation: Evidence from China," The Review of Financial Studies, Society for Financial Studies, vol. 30(7), pages 2446-2477.
    30. Cuevas-Vargas, Héctor & Aguirre, Joao & Parga-Montoya, Neftalí, 2022. "Impact of ICT adoption on absorptive capacity and open innovation for greater firm performance. The mediating role of ACAP," Journal of Business Research, Elsevier, vol. 140(C), pages 11-24.
    31. Jie He & Xuan Tian & Huan Yang & Luo Zuo, 2020. "Asymmetric Cost Behavior and Dividend Policy," Journal of Accounting Research, Wiley Blackwell, vol. 58(4), pages 989-1021, September.
    32. Tian, Meng & Chen, Yang & Tian, Guanghao & Huang, Wei & Hu, Chuan, 2023. "The role of digital transformation practices in the operations improvement in manufacturing firms: A practice-based view," International Journal of Production Economics, Elsevier, vol. 262(C).
    33. Zhou, Zhongsheng & Li, Zhuo, 2023. "Corporate digital transformation and trade credit financing," Journal of Business Research, Elsevier, vol. 160(C).
    34. Malodia, Suresh & Mishra, Mahima & Fait, Monica & Papa, Armando & Dezi, Luca, 2023. "To digit or to head? Designing digital transformation journey of SMEs among digital self-efficacy and professional leadership," Journal of Business Research, Elsevier, vol. 157(C).
    35. Jaegul Lee & Nicholas Berente, 2012. "Digital Innovation and the Division of Innovative Labor: Digital Controls in the Automotive Industry," Organization Science, INFORMS, vol. 23(5), pages 1428-1447, October.
    36. Ronny Prabowo & Reggy Hooghiemstra & Paula Van Veen-Dirks, 2018. "State Ownership, Socio-political Factors, and Labor Cost Stickiness," European Accounting Review, Taylor & Francis Journals, vol. 27(4), pages 771-796, August.
    37. Yang, Yefei & Yee, Rachel W.Y., 2022. "The effect of process digitalization initiative on firm performance: A dynamic capability development perspective," International Journal of Production Economics, Elsevier, vol. 254(C).
    38. Constance E. Helfat & Margaret A. Peteraf, 2003. "The dynamic resource‐based view: capability lifecycles," Strategic Management Journal, Wiley Blackwell, vol. 24(10), pages 997-1010, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ibrahim, Awad Elsayed Awad & Ali, Hesham & Aboelkheir, Heba, 2022. "Cost stickiness: A systematic literature review of 27 years of research and a future research agenda," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 46(C).
    2. Costa, Mabel D’ & Opare, Solomon, 2022. "Cost asymmetry around seasoned equity offerings," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    3. Naoum, Vasilios-Christos & Ntounis, Dimitrios & Papanastasopoulos, Georgios & Vlismas, Orestes, 2023. "Asymmetric cost behavior: Theory, meta-analysis, and implications," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 53(C).
    4. Cristiana Cattaneo & Gaia Bassani, 2020. "Sticky costs: le determinanti e le sfide per manager e accademici," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2020(Suppl. 1), pages 103-126.
    5. Mabel D. Costa & Ahsan Habib & Md. Borhan Uddin Bhuiyan, 2021. "Financial constraints and asymmetric cost behavior," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 32(1), pages 33-83, March.
    6. Wulung Li & Ramachandran Natarajan & Yan Zhao & Kenneth Zheng, 2021. "The effect of management control mechanisms through risk-taking incentives on asymmetric cost behavior," Review of Quantitative Finance and Accounting, Springer, vol. 56(1), pages 219-243, January.
    7. Mohammed Arkan Sahib Tileal & Farzaneh Nassirzadeh & Mohammad Javad Saei & Davood Askarany, 2023. "The Impact of Ownership Type on Labour Cost Stickiness," JRFM, MDPI, vol. 16(5), pages 1-17, May.
    8. Ziyang Li & Qianwei Ying & Yuying Chen & Xuehui Zhang, 2020. "Managerial risk appetite and asymmetry cost behavior: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(5), pages 4651-4692, December.
    9. Ali Amin & Rizwan Ali & Ramiz ur Rehman, 2022. "Cost Stickiness, Firm’s Dividend Payouts, and Family Ownership," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 27(1), pages 116-133, Jan-June.
    10. Wang, Sai & Wen, Wen & Niu, Yuhao & Li, Xin, 2024. "Digital transformation and corporate labor investment efficiency," Emerging Markets Review, Elsevier, vol. 59(C).
    11. Jeon, Heung-Jae, 2024. "CEO narcissism and asymmetric cost behavior," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    12. Wei Huang & Jaehyeon Kim, 2020. "Linguistically Induced Time Perception and Asymmetric Cost Behavior," Management International Review, Springer, vol. 60(5), pages 755-785, October.
    13. Peng Liang & Hasan Cavusoglu & Nan Hu, 2023. "Customers’ managerial expectations and suppliers’ asymmetric cost management," Production and Operations Management, Production and Operations Management Society, vol. 32(6), pages 1975-1993, June.
    14. Fangjun Wang & Lizhu Ma & Baojun Gao & Yang S Liu, 2024. "Does high-speed railway affect the cost behavior of tourism firms? Evidence from China," Tourism Economics, , vol. 30(1), pages 212-235, February.
    15. Sven Hartlieb & Thomas R. Loy, 2022. "The impact of cost stickiness on financial reporting: evidence from income smoothing," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3913-3950, September.
    16. Mabel D. Costa & Ahsan Habib, 2021. "Trade credit and cost stickiness," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 1139-1179, March.
    17. Lijun Ma & Xin Wang & Che Zhang, 2021. "Does Religion Shape Corporate Cost Behavior?," Journal of Business Ethics, Springer, vol. 170(4), pages 835-855, May.
    18. Christian Riegler & Katrin Weiskirchner-Merten, 2021. "Research note: an analytical perspective on market decisions and asymmetric cost behavior," Review of Managerial Science, Springer, vol. 15(4), pages 991-1005, May.
    19. Wanjiao Jia & Ting Yang & Xin Zhang, 2023. "The rise of robots and the fall of cost stickiness: Evidence from Chinese manufacturers," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3147-3171, September.
    20. Ahsan Habib & Mabel D Costa, 2022. "Cost stickiness and stock price crash risk," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4247-4278, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palcom:v:11:y:2024:i:1:d:10.1057_s41599-024-03179-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: https://www.nature.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.