Internal control quality, dynamic capabilities, and executive team diversity: mechanisms behind corporate digital transformation

Abstract In the digital economy era, corporate digital transformation has become a key strategy for enhancing competitiveness and sustainable development. This study investigates the impact of top management team (TMT) heterogeneity on corporate digital transformation and its underlying mechanisms. The findings reveal that TMT heterogeneity significantly enhances the degree of corporate digital transformation, driven by the mechanisms of internal control quality and dynamic capabilities. Specifically, TMT heterogeneity increases decision-making diversity and risk identification capabilities, thereby strengthening internal control quality. Meanwhile, through diverse perspectives and innovative thinking, it enhances the dynamic capabilities of firms, jointly promoting digital transformation. The shareholder relationship network positively moderates the effect of TMT heterogeneity on corporate digital transformation. These effects are particularly pronounced in high-tech firms, state-owned enterprises, heavily polluting companies, firms with higher financing constraints, and those in regions with lower levels of marketization. This study not only enriches the theoretical understanding of the relationship between TMT heterogeneity and corporate digital transformation but also provides valuable guidance for practice.