Developing a new framework on firm digitalization and firm performance: the role of enterprise risk management

Abstract

The study introduces and scientifically tests a new model concerning the linkage of Digital Transformation to Firm Performance that includes Enterprise Risk Management (ERM) and Innovation Capability as primary drivers, and Organizational Agility as a mediating mechanism. Guided by the Resource-Based View and Dynamic Capabilities Theory, the study addresses the integrated impact of digital and risk-oriented strategies on the outcomes of organizations in Jordan. The study sample comprised 203 respondents from various industries, and the proposed model was analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings indicate that digital transformation, ERM, and innovation capability have a strong impact on organizational agility, which in turn, positively affects firm performance. Moreover, innovation capability and agility are amplifier moderators and mediator enhancers of the performance outcomes from digital investments. This study enhances the theoretical ideas of integrating digital transformation and risk as well as providing managerial recommendations to improve competitiveness, agility, and sustainable engagement by firms through managed strategic digitalization.