The impact of formal power and informal power on firm innovation: the asymmetric moderating roles of digital transformation

Purpose The purpose of this paper is to examine the influence of formal power and informal power on firm innovation, with a particular focus on the moderating role of digital transformation. Design/methodology/approach The research sample consisted of Chinese A-share manufacturing firms between 2007 and 2024. Findings The research results indicate that both formal power and informal power have a significantly positive impact on firm innovation. However, the moderating effect of digital transformation on the impact of formal power and informal power is asymmetrical. In particular, digital transformation exerts a negative moderating effect on the relationship between formal power and firm innovation, whereas it exerts a positive moderating effect on the relationship between informal power and firm innovation. These results are subsequently validated through a series of robustness tests. Originality/value Firstly, this paper unpacks CEO power to examine the impact of formal power and informal power on firm innovation, rather than regarding it as an aggregate construct. Secondly, this paper contributes to the literature on digital transformation by empirically examining how digital transformation changes the impact of formal power and informal power on firm innovation. Thirdly, this paper contributes to the clarification of the relationship between CEO power and firm innovation by opening the “black box” of how digital transformation moderates the impact of formal power and informal power on firm innovation.