Research shows that firms increasingly proclaim digital transformation as an important competitive strategy. Less is known about when the policy of digital transformation is decoupled from the implementation of that, i.e., digital transformation decoupling. This decoupling is an unethical practice and allows firms to reap reputational benefits of appearing innovative without earnest commitment to transformation. We expand the literature on digital transformation by examining how TMT regulatory focus influences the occurrence of digital transformation decoupling. We theorize that TMT prevention (promotion) focus will be negatively (positively) associated with digital transformation decoupling. These effects are moderated by firms’ perceived economic policy uncertainty and market competition. Our theory and results indicate that TMT's motivational traits are important processes preceding the decision to digital transformation decoupling. Our models receive large support in a study of 26, 088 firm-year observations of Chinese listed firms during 2013-2021.
