Strategic data capital investment in a supply chain

Digital transformation needs two essential phases of endeavors: digitalizing and data-driving business activities. The former involves much ICT capital investment that was widely studied, while the latter requires ongoing data capital investment (DCI) with many research gaps. Thus, firms face a trade-off dilemma in an input-output decision for DCI. To overcome the dilemma and fill such a gap, we first employ grounded theory to explore the underlying mechanisms of DCI to create value. Second, we construct a DCI-embedded game model and analyze DCI's economic effects under three supply chain power structures. Last, we conduct a case study to verify the main findings. The results suggest that: (i) supply chain firms can boost their profits through DCI only when the DCI implementation cost and level are within specific ranges; (ii) DCI has a positive vertical externality in the supply chain; and (iii) a firm will be more likely to implement DCI when it has a stronger market position in the supply chain.