Using Dynamic Capabilities to Drive the Digital Transformation of the Firm: the Moderating Role of Internal and External Environmental Dynamism

The 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 the DT. Drawing on the dynamic capability perspective, the complementary assets view, and the contingency theory, this study examines the effect of firms’ dynamic capabilities (sensing and seizing capabilities) on their DT, and the moderating role of internal and external environmental dynamism. The analysis of lagged multi-source data collected from 122 firms (244 respondents) revealed that the 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. With regards to the firm’s internal environment, leadership dynamism and organizational dynamism both have a U-shaped moderating effect on the influence of the sensing capability, and leadership dynamism has an inverse U-shaped moderating effect on the influence of the seizing capability.