The effect of digitalization on business performance: An applied study Check for updates of KIBS Samuel Ribeiro-Navarrete , Dolores Botella-Carrubi, Daniel Palacios-Marques , Maria Orero-Blat Calle Menorca, 19 46023 Valencia, Spain Departamento de Organizacion de Empresas, Universitat Politecnica de Valencia, Camino vera s, 46022 Valencia, Spain Universitat Politecnica de Valencia, Camino vera s, 46022 Valencia, Spain ARTICLE INFO ABSTRACT Keywords: Although digitalization is a reality for companies and contributes to value creation, few studies have examined its Knowledge-intensive business services impact on business performance in the service sector. The aim of this paper is to analyze how the digitalization of KIBS knowledge-intensive business services (KIBS) contributes to their performance. The analysis centers on their use Digitalization Information systems of information systems, as well as the contingent factors of the manager's age and gender and company size. This Financial performance study explores how these factors contribute to the performance of KIBS, with performance here measured in terms of future financial performance. The analysis was conducted using fuzzy-set qualitative comparative analysis (fsQCA). The study shows that updating social networks, using social networks for corporate purposes, having a high level of training in digital tools, and having older managers can enhance company performance. 1. Introduction companies are at the same stage of development in this process (Som- marberg & Makinen, 2019). Therefore, to generalize the results of pre- Today's digital era revolves around the use of new technologies that vious studies, a sufficient number of KIBS must first have implemented create value for companies and offer a host of benefits (Sommarberg & these novel tools. To shed light on this topic, we analyze the perfor- Makinen, 2019; Parida et al., 2019; Scott et al., 2019). Despite the ad- mance effects of relatively simple digital tools that are accessible to any vantages that this technological revolution offers the business commu- company and that are considered part of digitalization. Second, no nity, there has been little discussion of its impact on the service sector, previous study has focused on financial performance as an outcome of particularly regarding its effect on the performance of knowledge- the effect of digitalization on KIBS. Janger et al. (2017) argue that KIBS intensive business services (KIBS; Gors, Hummert, Traum, & Ner- have superior levels of profitability and productivity. However, the dinger, 2019). Studies have shown the benefits of using highly innova- factors (or combinations of factors) that lead to this superior perfor- tive technologies such as blockchain (Liu et al., 2018), the Internet of mance remain unknown. Things (Bresciani et al., 2018), and big data (Loebbecke & Picot 2015), This study examines how the use of new technologies arising from understood as a system of technologies. Some of these advantages relate the Fourth Industrial Revolution can influence the performance of KIBS. to attracting and satisfying customers (Serravalle et al., 2019) through We study the use of simple tools that are accessible to any company.Calle Menorca, 19 46023 Valencia, Spain Departamento de Organizacion de Empresas, Universitat Politecnica de Valencia, Camino vera s, 46022 Valencia, Spain Universitat Politecnica de Valencia, Camino vera s, 46022 Valencia, Spain ARTICLE INFO ABSTRACT Keywords: Although digitalization is a reality for companies and contributes to value creation, few studies have examined its Knowledge-intensive business services impact on business performance in the service sector. The aim of this paper is to analyze how the digitalization of KIBS knowledge-intensive business services (KIBS) contributes to their performance. The analysis centers on their use Digitalization Information systems of information systems, as well as the contingent factors of the manager's age and gender and company size. This Financial performance study explores how these factors contribute to the performance of KIBS, with performance here measured in terms of future financial performance. The analysis was conducted using fuzzy-set qualitative comparative analysis (fsQCA). The study shows that updating social networks, using social networks for corporate purposes, having a high level of training in digital tools, and having older managers can enhance company performance. 1. Introduction companies are at the same stage of development in this process (Som- marberg & Makinen, 2019). Therefore, to generalize the results of pre- Today's digital era revolves around the use of new technologies that vious studies, a sufficient number of KIBS must first have implemented create value for companies and offer a host of benefits (Sommarberg & these novel tools. To shed light on this topic, we analyze the perfor- Makinen, 2019; Parida et al., 2019; Scott et al., 2019). Despite the ad- mance effects of relatively simple digital tools that are accessible to any vantages that this technological revolution offers the business commu- company and that are considered part of digitalization. Second, no nity, there has been little discussion of its impact on the service sector, previous study has focused on financial performance as an outcome of particularly regarding its effect on the performance of knowledge- the effect of digitalization on KIBS. Janger et al. (2017) argue that KIBS intensive business services (KIBS; Gors, Hummert, Traum, & Ner- have superior levels of profitability and productivity. However, the dinger, 2019). Studies have shown the benefits of using highly innova- factors (or combinations of factors) that lead to this superior perfor- tive technologies such as blockchain (Liu et al., 2018), the Internet of mance remain unknown. Things (Bresciani et al., 2018), and big data (Loebbecke & Picot 2015), This study examines how the use of new technologies arising from understood as a system of technologies. Some of these advantages relate the Fourth Industrial Revolution can influence the performance of KIBS. to attracting and satisfying customers (Serravalle et al., 2019) through We study the use of simple tools that are accessible to any company. improvements in network cybersecurity, enhancing capabilities and Specifically, we examine social network updates, the corporate use of organizational learning, and innovating. After reviewing previous con- digital tools and social networks, and training in new digital tools. We tributions on the topic, two reflections emerge. also study the influence of several contingent factors that may influence First, the Fourth Industrial Revolution, and therefore digitalization, this relationship. The analysis of contingent factors centers on the are broad concepts that encompass the use of numerous tools. Although manager's age and gender and the size of the digitalized company. these systems of interrelated technologies should be studied and pro- Finally, regarding the method, fuzzy-set qualitative comparative anal- moted, they are not yet fully implemented in service companies. Not all ysis (fsQCA) is employed. Using fsQCA, combinations of conditions areJournal of Business Research 125 (2021) 319-926 studied to investigate how their interaction can lead to the outcome of returns (Carvalho & Sarkar, 2010). As noted earlier, multiple technol- strong financial performance. The aim of this study in to identify the ogies and ayatems are shaping this new era. Many of these technologies combination of conditions and factors that lead to high performance. play a role in business performance. Therefore, it is important to study Ultimately, the hope is to provide simple yet effective recommendations which Industry 4.0-related factors and which combinations of theme for knowledge and service companies that are struggling to digitally factors lead to the superior performance of KIBG. This line of inquiry can transform their businesses. provide practical advice to help KISS in their digitalization processes. The structure of this paper is as follows. Section 2 presents the Two groups of conditions are considered in this study: the use of theoretical framework for both information aystems and the contingent information systems and the contingent factors of KING. There condi- actors considered in this study. Sect on 3 describes the method. Sect tions may bear some relation to the outcome. The selected conditions are I reports and discusses the results of the analysis. Section 5 presents the (1) social network updates, (2) the use of new digital tools and social liscunsion. Finally, the conclusions are stated in Section 6. networks, (3) training in new digital tools, (4) the age of the manager of the digitalized company, (5) the gender of the manager of the digitalized 2. Theoretical framework company, and (6) the size of the company, me wured as the number of employees. The first three relate to the use of information ayotemno; the The service sector plays a key role in driving employment and others are contingent factors. The analysis of these conditions shows increasing public well-being in the OECD countries (Miles, Belounova, & which of them positively influence the performance of KIBG an a result of Chichkanov, 2017). Within the service (or tertiary) sector, there in evi- digitalization. The theoretical framework presented in the next section dence that KIBS have superior levels of profitability and productivity includes a review of the main technologies used in the digitalisation of (Janger et al, 2017). KIBG. The six propositions tested in this study are then presented In recent years, numerous authors have studied knowledge markets and KIBS, which are the consequence of service innovation (Chung & 2.1. Key technologies and innovation in knowledge-intensive business Tseng, 2019). The concept of KIES emerged in the early 1990s, when services scholars began to discover similarities among certain types of service companies (Doloreux, Freel, & Shearmur, 2010; J-Figueiredo, Vieira Fundamental changes due to digitalisation processes and big data Neto, Goncalves Quelham, & de Matos Ferreira, 2017). This discovery analytics are believed to reshape knowledge-intensive industries and coincided with a surge in globalization, which led to an intensification of services (Loebbecke and Picot 2015) and increase customer attraction the workforce, especially the qualified segment (Athota & Malik, 2019). and satisfaction across service offerings (Serra walle et al., 2019). Theme The two key characteristics of KIES are knowledge and services. Unlike in changes and improvements are strongly related to an increase in firm other service industries, where the core offerings are services, KIBS performance and competitiveness (Mikalef et al., 2019). However, the primarily produce knowledge, and services constitute secondary offer- use of blockchain technology in KIBG is slowly increasing, especially to ing: (Chung & Toeng, 2019]. According to Strambach (2006), KIES aloo enhance network cybersecurity and verify personal certificates (Liu appear to play a central role as drivers of the dynamics of knowledge in a etal., 2010). The Internet of Things (ToT) has enabled physical objects to range of contexto, contributing to transforming knowledge and compe- share information and communicate with each other so that joint de- tency bases and developing employee skills within companies. cisions can be made (Ghobakhloo, 2010). It has also affected the way Digitalization can be defined simply as the use of digital technologies that KIES approach innovation and how they create and capture value to create value for a company (Sommarberg & Makinen, 2019). Its for their employees and clients in everyday business activities (Bresciani benche are numerous and include automating and optimizing processes et al, 2010). to improve productivity, saving costa, streamlining production, sub- There technologies also increase organizational learning and the stantially reducing human error, and fostering a culture of innovation capabilities of adaptability and agility in the workforce. These factors Parida et al, 2019; Scott et al., 2019). Digitalization today is primarily are closely related to increased performance (Rialti et al., 2019). Few driven by some key technologies that have evolved in recent years. The KIBG still implement these cutting edge technologies in digitalication. Fourth Industrial Revolution offers the opportunity for those who took However, according to Horvath and Sserb (2010), the use of such novel advantage of the previous waves to continue to develop and progress technologies is not necessary to make significant advances in business and generate wealth and economic development (Schwab & Davis, models and economic performance. Therefore, although we analyze 2018). Industry 4.0 (reminiscent of the Fourth Industrial Revolution) their importance in the current digital transformation processes and the has the potential to generate competitive advantages in organis Industry 4.0 paradigm, this study focuses on digital tools and proc (Frederico, 2010). However, it cannot be understood in isolation and that a large number of KIDS have already implemented and embraced. must instead be interpreted as an interdependent system of techno. (Untundag & Cervikcan, 2017). Digital traceability, cybersecurity, social 2.2. The use of information system networks and information systems, the Internet of Things, big data, blockchain technology, and virtual reality are examples of technologies 2.2.1. Social network updates by digitalised companies that form the aforementioned systems and shape the society of the future Today, many companies use social networks to interact with cus- (Untundag & Cervikcan, 2017). In addition, with these emerging tech- tomers and build online communities (Ayodeji & Kumar, 2019). The une nologies, it must be ensured that the benefits of the Fourth Industrial of social networks in one of the most widely adopted marketing strate- Revolution are distributed fairly across society and that we are living a gies by companies to forge brand-customer relationships (Ayodeji & revolution by the people, for the people. The Fourth Industrial Revolu- Kumar, 2019). Big data is related to this concept, and its impact on tion is human centered, and digitalization is reshaping the way talent is business performance has been shown (Ferraris et al, 2019). An active managed by companies (Botella & Tudela, 2020). However, although corporate social network profile is capable of making consumers ligitalization and the Fourth Industrial Revolution reflect a major trend, perceive the brand in a favorable light so as to become loyal customers the literature barely addresses the relationship with the service sector in Park & Kim, 2014). Customers are a vital part of corporate marketing general, particularly in terms of the effect on the performance of KIBS and communication processes, no social network updates contribute to Gore, Hummert, Traum, & Nerdinger, 2019). achieving objectives and creating successful digital contact hubs 1383 are one of the growing segments of the European economy. (Buenano et al, 2015). In addition, more generous budgets in content Studies have shown moderate positive relationships between a firm's marketing and social network updates have been found to lead to an degree of technological innovation and the level of service innovation increase in conversions and sales (Forouzandeh et al., 2014; Kothari and digitalisation, an well an between these three factors and market et al., 2016). Finally, customer participation in greater when social 320Journal of Business Research 126 (2021) 919-326 analyzed to draw a valid conclusion. Windrum and Tomlinson (1999) systems. Table 1 gives more detail on the outcome and conditions. reported that KIDS tend to be small but that knowledge exploitation and performance do not rely on company size. Horvath and Sserb (2018) 3.5. Calibration noted that resource constrained small firms are better able to improve their business models from a cost perspective and enhance their results. Fo()CA was used to study the combinations of conditions and observe Therefore, we test whether this condition affects company performance. how interactions between them can lead to the outcome of interest. The The sixth proposition is thus stated raw data from the survey of managers were calibrated into fuzzy values Proposition 6: The size of the digitalized company (number of em- following the guidelines provided by Ragin (2009). The full membership ployees) influences its performance. and full non-membership of each case was represented by placing the values on a scale of 0.0 to 1.0. The transformation of the raw data into 3. Method fuzzy values is known as calibration In this study, the following values were used to determine the membership levelx 2 0.95 for full mem- 3.1. Comple bership,