Manufacturer’s modularity and operation performance: the role of digital embeddedness and organization compatibility

Purpose This study aims to explore whether organization modularity affects the operation performance of manufacturing firms through the mediator of digital embeddedness and the moderator of organization compatibility. Design/methodology/approach Hierarchical regression, mediation effect test macro and bootstrap were conducted to empirically analyze two waves of longitudinal survey data from 284 Chinese manufacturing firms. Findings Digital embeddedness (digital technology, digital infrastructure and digital culture) mediates the relationship between organization modularity and operation performance. In addition, organization compatibility positively moderates the relationship between the three types of digital embeddedness and operation performance. Under a high organization compatibility degree, digital embeddedness has a positive impact on operational performance, but under a low organization compatibility degree, its impact is negative. Practical implications Organizational modularity is an important measure for manufacturers to gain competitive advantages, especially in the industrial transformation driven by the digital economy. Manufacturers need to realize modularity immediately and consider the compatibility of digitalization so that they can embed digital technology more flexibly and adaptively and gain operational advantages. Originality/value This study is very relevant for industrial manufacturers, as they urgently need to know how to gain competitive advantages through organizational change in digital transformation. This study provides many reliable theoretical guidelines. Specifically, this study tells manufacturers how to better realize digital embedding and performance through modularity and how to improve the compatibility between digitalization and organization.