Influence of External Pressures on the Digital Transformation of Institutions Master’s Thesis 15 credits Department of Business Studies Uppsala University Spring Semester of 2020 Date of Submission: 2020-06-03 Jiayin Yu Fenfen Pan 1 Supervisor: Pao Kao Abstract More and more institutions have begun to implement digital transformation. Identifying the reasons behind institutions’ digital transformation can help them make the right strategies. This thesis focuses on the digital transformation taking place in the financial industry and uses organizational institutionalism theory to analyze the influence of external pressures, and what responsible strategies institutions may adopt. We use qualitative methods to conduct the research. We interview eight employees from different institutions in the financial industry in China. Our findings show how coercive, mimetic, and normative pressures affect these financial institutions differently, and in responding to these pressures, these financial institutions develop office management systems and new digital products and services. The study evaluates to which extent the new digital reality fits the theory of the influence of external pressures on institutions. For managerial practice, the findings provide guidance in describing and diagnosing external pressures that drive digital transformation, and in coping with these pressures appropriately to formulate effective digital transformation strategies. Keywords: digital transformation, organizational institutionalism, coercive pressure, mimetic pressure, normative pressure, organizational response i Contents 1. Introduction.......................................................................................................................................1 1.1 Digital Transformation.......................................................................................................... 1 1.2 Digital Transformation as an Organizational Change........................................................... 1 1.3 Research Questions and Research Design.............................................................................2 2. Literature Review..............................................................................................................................3 2.1 Digital Transformation.......................................................................................................... 3 2.1.1 Definition of digital transformation........................................................................... 3 2.1.2 Measures of digital transformation............................................................................ 5 2.1.3 Value of digital transformation.................................................................................. 5 2.2 Organization Change under External Pressures.................................................................... 6 2.2.1 Institution and organization....................................................................................... 6 2.2.2 External institutional pressures.................................................................................. 7 2.2.3 Organizational strategic response to external institutional pressures........................ 9 3. Research Methodology................................................................................................................... 11 3.1 Research Design.................................................................................................................. 11 3.1.1 Qualitative study...................................................................................................... 11 3.1.2 Multiple case study.................................................................................................. 12 3.1.3 Concept operationalization and question guide design............................................12 3.2 Sampling and Data Collection.............................................................................................14 3.2.1 Purposive sampling.................................................................................................. 14 3.2.2 Accessing research target group...............................................................................15 3.2.3 Semi-structured interview........................................................................................ 16 3.3 Data Analysis.......................................................................................................................17 3.4 Validity and Reliability....................................................................................................... 17 4. Findings and Analysis.....................................................................................................................18 4.1 Digital Transformation........................................................................................................ 18 4.1.1 Office management information systems................................................................ 18 ii 4.1.2 Value of office management information systems...................................................19 4.1.3 Digital products and services................................................................................... 20 4.1.4 Value of digital products and services..................................................................... 21 4.2 External Pressures............................................................................................................... 22 4.2.1 Coercive pressure.....................................................................................................22 4.2.2 Mimetic pressure......................................................................................................23 4.2.3 Normative pressure.................................................................................................. 24 4.3 Response to External Pressures........................................................................................... 25 4.3.1 Imitation...................................................................................................................25 4.3.2 Translation............................................................................................................... 26 5. Discussion....................................................................................................................................... 26 5.1 Digital Transformation and Value.......................................................................................26 5.2 External Pressures............................................................................................................... 27 5.2.1 Coercive pressure.....................................................................................................28 5.2.2 Mimetic pressure......................................................................................................29 5.2.3 Normative pressure.................................................................................................. 29 5.3 Response to External Pressures........................................................................................... 30 5.3.1 Imitation...................................................................................................................30 5.3.2 Translation............................................................................................................... 31 6. Conclusion...................................................................................................................................... 32 7. Limitation and Future Research......................................................................................................33 References.............................................................................................................................................. 35 Appendix................................................................................................................................................ 38 iii 1. Introduction 1.1 Digital Transformation With the development of information technology and Internet technology, digital transformation has become a new management fashion (Liu et al., 2011), and a growing number of institutions from various industries have begun the process of digital transformation. Digital transformation is a change in the institution’s application of digital technologies to develop a new business model that enables the institution to create more value and attain competitive advantage (Verhoef et al., 2019). In the financial industry, for example, many banks are implementing e-banking projects and establishing own e-banking systems to add value and reduce costs (Liu et al., 2011). European insurer Axa, for instance, invested 950 million euros in digital transformation from 2015 to 2017, helping the institution reduce costs by half in the next five years (Catlin et al., 2017). As many industries are experiencing intensive competition, it may be crucial for institutions to obtain competitive advantage through digital transformation (Mergel et al., 2019). Given the visible trend of digital transformation, recent research has started to address relevant topics, such as definition and evaluation of digital transformation, digital business strategy, and the influence of technical factors and other organizational capabilities (Mergel et al., 2019; Fischer, 2020; Park & Mithas, 2020). At the start we conceived analyzing internal factors as they offer a