When the Pieces Do Not Fit: Digital Orientation, Strategic Incoherence, and Firm Performance

ABSTRACT The performance payoff to a firm's digital orientation depends less on how much the firm emphasizes digitalization than on how coherently that emphasis is configured. Text analysis of the annual reports of Chinese A‐share listed firms from 2010 to 2024 yields a four‐domain measure of digital orientation—technology scope, capabilities, ecosystem coordination, and architecture—and a measure of strategic incoherence: the imbalance of attention across these domains. Digital orientation predicts higher firm performance, but incoherence erodes the payoff steeply: Moving across the interquartile range of incoherence reduces the marginal return to digital orientation by roughly 71%, and the return falls to zero for the most incoherent firms. The erosion appears on three efficiency margins—investment efficiency, total factor productivity, and labor productivity—consistent with incoherent configurations leaving the complements of digital investment underdeveloped. The cost of incoherence is smaller for firms with technical talent and slack resources and larger for diversified firms. In digital strategy, configuration matters as much as commitment.