Unleashing the Power of Dynamic Capabilities : Navigating Internal and External Environments for Successful Digital Transformation

Digital transformation (DT) is a complex, revolutionary, and continuous process of strategic renewal. It requires firms to invest resources, but these firms often fail in pursuing DT. Drawing on the dynamic capability perspective, the complementary assets view, and contingency theory, this study examines the effect of firms’ dynamic capabilities (sensing and seizing capabilities) on the DT, and the moderating role of internal and external environmental dynamism. Analyses of lagged multi-source data collected from 122 firms (244 respondents) reveal that sensing and seizing capabilities, individually and in combination, positively influence the degree of DT. The dynamism of the firm’s external environment negatively moderates the influence of these capabilities. Regarding the firm’s internal environment, leadership dynamism and organizational dynamism both have a U-shaped moderating effect on the influence of sensing capability, and leadership dynamism has an inverted U-shaped moderating effect on the influence of seizing capability