The Role of Dynamic Capabilities and Strategic Orientation for Digital Transformation: A Configurational Approach

Purpose: Today, digital transformation is becoming a critical challenge for achieving sustainable competitive advantage in the digital economy. However, most of the research conducted so far has focused on linear models to explain the essentially non-linear relationships between the leading factors important for digital transformation. Therefore, based on the configurational approach, the aim of this paper is to find paths for the success or failure of digital transformation based on the interaction between dynamic capabilities and strategic orientation. Design/Methodology/Approach: In this study, focusing on discovering and understanding the causal mechanisms of digital transformation, a configurational set-theoretic analysis was performed using fuzzy set qualitative comparative analysis (fs/QCA). Polish SMEs were selected and used fs/QCA to explore how companies can engage strategy and dynamic capabilities to achieve digital transformation. Findings: The research shows: (1) a single condition of dynamic capabilities or strategic orientation is not a necessary condition for high digital transformation, (2) two configuration paths can contribute to high digital transformation of companies, (3) there are two configuration paths leading to low digital transformation, which makes it possible to verify the asymmetric relationship by comparing the configuration paths of high and low digital transformation. Practical Implications: For managers of SMEs, a holistic understanding of the relationship between organizational strategy and dynamic capabilities together with the complex causal interactions occurring between these dimensions is necessary. The digital transformation of SMEs is not the result of a single condition but rather the interaction of different elements of strategic orientation and dynamic capabilities. This conclusion suggests that companies cannot limit themselves to optimizing single elements of strategic orientation or dynamic capabilities. Importantly, more attention needs to be paid to the complex web of causal mechanisms between the analyzed conditions in order to create a combination that leads to high digital transformation. SMEs should choose the right digital transformation path built on their chosen strategic direction and their capability base. According to the research, for SMEs with a clear strategic orientation, a focus on enhancing sensing capability is a recipe for achieving digital transformation; if SMEs have strong dynamic capabilities, building a technological orientation is an important configuration for achieving high-level digital transformation. Originality/Value: The findings provide a contribution to the literature on digital transformation. The introduction of a configuration perspective focusing on the analysis of the synergistic effect and combination relationship between elements allowed for the discovery of many equifinal paths to achieve high digital transformation.