Cost Drivers in the Era of Digital Transformation: Evidence from Listed Service Firms in Nigeria

Abstract

This study examines the effect of digital transformation on cost drivers in the Nigerian service sector, with particular emphasis on cost stickiness. Using a quantitative research design, the study adopts a panel data approach covering listed service firms in Nigeria. Digital transformation is modelled as a key explanatory variable, while firm size and IT capability are incorporated as moderating factors to capture organisational heterogeneity. Panel regression techniques are employed to analyse the relationships among the variables, with relevant control variables included to ensure robustness.
The findings reveal that digital transformation exerts a significant negative effect on cost stickiness, indicating that digitally enabled firms are better able to adjust their cost structures in response to changes in activity levels. Firm size and IT capability are also found to significantly reduce cost stickiness and to strengthen the impact of digital transformation through their moderating effects. These results suggest that the cost flexibility benefits of digitalisation are contingent on organisational scale and technological readiness.
The study contributes to the literature by providing emerging-economy evidence on the digital transformation–cost behaviour nexus, highlighting the conditional role of firm characteristics, and integrating insights from technology adoption and cost management research. From a practical perspective, the findings underscore the importance of strategic digital investments and IT capability development in enhancing cost efficiency and adaptability within service firms.