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Resource integration and firm Resource

integration and
performance through dynamic
capabilities
organizational capabilities for
digital transformation
Ming-Hsiung Hsiao Received 3 July 2023
Revised 8 October 2023
Department of Information Management, Shu-Te University, Kaohsiung, Taiwan 20 October 2023
Accepted 24 October 2023

Abstract
Purpose – Digital transformation is a foundational change in how firms operate and deliver value to
customers by using digital technologies to create new business opportunities. The purpose of this study is to
offer a conceptual framework by reorganizing the elements of digital transformation, including resources,
technology, capabilities and performance, into a workable process and investigating how firms integrate these
resources, build new capabilities and transform them into enhanced performance.
Design/methodology/approach – This framework builds three blocks: resource integration, organizational
capabilities and outcomes, exploring the impact of resource integration on outcomes through organizational
capabilities. For resource integration, this study adopts a resource-based view (RBV) and service-dominant
logic (SDL) to integrate organizational resources, including information technology (IT)-based resources, which
play a role in moderating the effect of resource integration. Moreover, the author argues that firms’ capabilities
have two levels: higher-order capabilities and lower-order capabilities, which will convert these resources
through the capabilities into organizational performance.
Findings – This framework is built to understand the process of digital transformation and its antecedents for
firms’ performance in business environments. Drawing on RBV, it provides a more holistic perspective that has
been linked to resource integration, organizational capabilities and outcomes at the firm level. In this way, the
theoretical basis for diminishing implicitness associated with the current perspective of digital transformation
can be strengthened.
Originality/value – This paper offers a coherent discussion of digital transformation and explains the
process of digital transformation, thus advancing prior work. The major contribution is connecting the process
of digital transformation through which firms integrate resources, i.e. digital technologies and valuable, rare,
inimitable and nonsubstitutable (VRIN) and nonVRIN resources as well, to build organizational dynamic
capabilities based on RBV and SDL.
Keywords Digital transformation, Digital disruption, Resource integration, Dynamic capabilities,
Business model
Paper type Research paper

1. Introduction
Digital transformation is a foundational change in how firms operate and deliver value to
customers by using digital technologies to create new business opportunities in response to
market disruptions. Digital transformation is often confused with two similar concepts:
digitization and digitalization. “Digitization” is the process of transforming analog
information into a digital format such that computers can store process and transmit such
information; for example, converting handwritten records into computerized records

© Ming-Hsiung Hsiao. Published in Digital Transformation and Society. Published by Emerald

Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0)
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authors. The full terms of this licence may be seen at [Link] e-ISSN: 2755-077X
p-ISSN: 2755-0761
legalcode DOI 10.1108/DTS-07-2023-0050

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 DTS (Verhoef et al., 2021). “Digitalization” is the process of applying digital technology and
capabilities to change existing business processes. Comparatively, “digital transformation” is a
drastic transformation brought about by digital technologies to not only a firm’s business but
also the entire economy and society (Kim, Choi, & Lew, 2021). According to the conceptual
definition from Vial (2019), digital transformation is “a process that aims to improve an entity
by triggering significant changes to its properties through combinations of information,
computing, communication, and connectivity technologies”. It leads to major changes in
business processes, operational routines, organizational capabilities and even the markets for
the business (Singh, Sharma, & Dhir, 2021).
Kraus et al. (2022) summarizes the different digital transformation definitions with
different focus on technology, organizations, customers, processes, operations, performance
and business models. In general, digital transformation covers many elements mainly
including technology, business and society (Reis, Amorim, Mel~ao, & Matos, 2018; Van
Veldhoven & Vanthienen, 2022) in which firms develop a new digital business model to create
value (Vial, 2019; Verhoef et al., 2021; Singh et al., 2021; Wengler, Hildmann, & Vossebein,
2021). “Technology” includes the popular social, mobile, analytics, cloud and the Internet of
Things (SMACIT), “business” the internal business processes, connectivity between
suppliers and customers, offerings (products and services), organizational structure and
business model (Van Veldhoven & Vanthienen, 2022), while “society” includes people,
community, institution and value.
Indeed, although there is no established definition of digital transformation, much
literature has addressed the links between digital technologies and business model to build
dynamic capabilities, e.g. digital sensing, digital seizing and digital transforming capabilities,
for digital transformation (Warner & W€ager, 2019; Kraus et al., 2021; Imran, Shahzad, Butt, &
Kantola, 2021). It is the process of using digital technologies to modify existing business
processes under institutions by integrating resources from suppliers and customers to create
value. In this definition of digital transformation, many scholars emphasize the importance of
restructuring business processes through digitalization. For example, “business process
re-engineering (BPR) ” or “enterprise resource planning (ERP) ” focuses on the analysis and
design of workflows and business processes within an organization, while “service design”
stresses redesigning the process of integrating resources in creating service innovation for
customers. All these transformations are aimed to restructure the process by using
technologies within an organization involved in elements including resources (operant and
operand resources), actors (suppliers and customers), institutions and value.
Recent studies have made efforts to build conceptual frameworks by reorganizing the
elements of digital transformation with a view to create new business models. Some are
focused on business and society (e.g. Van Veldhoven & Vanthienen, 2022; Wengler et al.,
2021; Imran et al., 2021), others are organizational change (e.g. Hanelt, Bohnsack, Marz, &
Marante, 2021; Verhoef et al., 2021) and still others are dynamic capabilities (e.g. Warner &
W€ager, 2019; Magistretti, Pham, & Dell’Era, 2021; Konopik, Jahn, Schuster, Hoßbach,
& Pflaum, 2022). In this study however, our main focus is on the business process in the
context of digital transformation where digital technologies play a leading role bringing
about disruption in the competitive environment and then consequently reconfigure elements
of their business model. In doing so, firms can incorporate digital technologies into resource
integration to build organizational dynamic capabilities and support the ongoing digital
transformation.
More specifically, this study will build links between resource integration, digital
technologies, organizational capabilities and firm performance and develop a conceptual
framework to explain the digital transformation based on resource-based view (RBV) and
service-dominant logic (SDL). In this process, by using digital technologies, firms are expected
to improve resource integration, enhance organizational capabilities and finally improve

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 organizational performance. According to Vial (2019), digital transformation is a process Resource
where digital technologies create an impetus for firms to sense disruptions, seize them and to integration and
reconfigure elements of their business model. Through the three main mechanisms, e.g.
sensing, seizing and transforming, from dynamic capabilities, firms can adapt to changes in
dynamic
their environment and sustain competitive advantage (Teece, 2007). Dynamic capabilities, capabilities
distinguished from ordinary capabilities, emerged from the RBV in explaining how firms
react, adapt and respond to changes in volatile environments and convert resources into
improved performance (Teece, Pisano, & Shuen, 1997; Pan, Pan, & Lim, 2015; Vial, 2019).
The main purpose of this study, therefore, is to offer a conceptual framework by
reorganizing the elements of digital transformation, including resources, technology,
capabilities and performance, into a workable process and investigate how firms integrate
these resources, build new capabilities and transform them into enhanced performance. The
remainder of this paper is structured as follows. It first reviews the literature related to digital
transformation. It then gives the theoretical background about digital technology and
disruption, resource integration and dynamic capability linked to RBV in Section 3. In Section 4,
it offers a conceptual framework that links organizational capabilities, resources integration
and performance outcomes and develops a set of propositions corresponding to the framework.
Finally, it presents the discussions and conclusions in Section 5.

2. Digital transformation
In the existing literature, digital transformation does not have a unified definition both in the
academic and practitioner communities (Van Veldhoven & Vanthienen, 2022; Gong &
Ribiere, 2021). Gong and Ribiere (2021) tries to develop a unified definition of digital
transformation that differentiates from the related key terms (e.g. digitalization and
digitization) and identifies the core attributes of the digital transformation definition. They
explain that considerable confusion and misconception in the extant literature fail to
distinguish adequately between the three similar concepts digitization, digitalization and
digital transformation. According to Gartner’s Information Technology (IT) Glossary,
digitization is the process of changing from analog to digital form, digitalization is the use of
digital technologies to change a business model, while digital transformation refers to
anything from IT modernization to digital optimization, to the invention of digital business
models (Gartner, 2022).
Digital transformation is a process consisting of various stages in using advances in
digital technologies to build capabilities that create new or modify existing organization’s
business model within firms, ecosystems, industries, or fields (Warner & W€ager, 2019;
Wengler et al., 2021; Kraus et al., 2022; Konopik et al., 2022). The technologies are
transforming the society and business that are confronted both internally and externally with
novel challenges (Magistretti et al., 2021; Van Veldhoven & Vanthienen, 2022). Digital
transformation highlights the modification of processes, products, business models and
human behaviors by digital technologies with the aim of designing the organization’s
activities more efficiently and effectively to achieve better performance and competitive
advantage (Singh et al., 2021; Wengler et al., 2021; Li, 2022). In other words, digital
transformation goes beyond digital technologies recognized as a holistic socio-technical
challenge resulting in drastic consequences for economies, societies, organizations and
individuals (Singh, Klarner, & Hess, 2020; Konopik et al., 2022). Van Veldhoven and
Vanthienen (2022) propose an interaction-based digital transformation framework which
covers three axes: digital technologies, business and society, to better understand the changes
in organizations.
Based on the literature review, Vial (2019) develops a conceptual inductive framework to
describe digital transformation as a process which comprises eight building blocks: (1) use of

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 DTS digital technologies, (2) disruptions, (3) strategic responses, (4) change in value creation paths,
(5) structural changes, (6) organizational barriers, (7) positive impacts and (8) negative
impacts, as depicted in Figure 1. In this conceptual framework, digital technologies (e.g.
SMACIT), plays a central role in the creation which brings about the reinforcement of
disruptions taking place at the society and industry levels (e.g. consumer behavior and
expectations) (A1 in Figure 1). These disruptions trigger strategic responses from
organizations (A2) which then devise ways to remain competitive as digital technologies
(A3). After that, organizations use digital technologies to implement structural changes (A5)
and overcome barriers (A6) from transformation effort and then alter the value creation paths
(A4). These changes finally lead to positive impacts (A7) and negative impacts (A8) for
organizations, society and individuals.
Different from Vial’s framework, Gong and Ribiere (2021) develops a digital
transformation conceptual framework in building blocks and explains key elements
involved in the process of digital transformation. These key elements include technologies,
resources, capabilities and outcomes, linking the blocks of digital transformation.
Specifically, firms push digital transformation by wisely using digital technologies and
strategically leveraging their resources and capabilities toward business model innovation
and then turn specific desired outcomes including economic-driven outcomes (e.g. efficiency,
productivity) and capability-driven outcomes (e.g. leadership, competitive advantage), as
depicted in Figure 2.
Comparatively, Kraus et al. (2022) determine five thematic areas: (1) structural changes
and changes in value creation, (2) use of digital technologies, (3) dynamic capabilities, (4)

Strategic Structural
Responses Changes
Negative
Impacts
A2 A3 A5

A1 A4 Change in A8
Use Of Digital
Disruptions Value Creation
Technologies
Paths A7

Figure 1. A6
Building blocks Positive
describing digital Organizational Impacts
transformation as a Barriers
process
Source(s): Vial (2019)

Digital Innovative
Technologies

Outcomes
 Economic-driven
Resources  Capability-driven
Figure 2.
Building blocks of
digital transformation
linking the key Capabilities Strategic
elements
Source(s): Gong and Ribiere (2021)

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 strategic response and (5) consumer behavior, following Vial’s building blocks. Especially, Resource
given the structural changes in industries, Kraus et al. (2022) develops a synergistic integration and
framework focusing on dynamic capabilities and big data from the RBV. Wengler et al. (2021),
however, put more emphasis on the market-oriented transformation model following the
dynamic
technology-oriented development stage through which digitization, data integration, process capabilities
automation system integration and self-learning systems support the evolving processes,
whereas Imran et al. (2021) put more on the key enablers of digital transformation including
leadership, structures and culture for achieving performance outcomes. Obviously, scholars
demonstrate different focus from different perspectives on the digital transformation.

3. Theoretical background
3.1 Business models triggered by digital technologies and disruption
One of the main objectives of digital transformation is to utilize digital technologies (e.g.
SMACIT) and increase the efficiency of business processes, gain competitive advantage and
create new business models from disrupting conventional industry and business logics. In
definition, digital disruption is a transformation caused by emerging digital technologies to
fundamentally alter historically sustainable logics for a change of customer experiences,
business processes and business models that affect value propositions in an ecosystem (Skog,
Wimelius, & Sandberg, 2018; Thakur, AlSaleh, & Hale, 2023; H€ogberg & Willermark, 2022).
Thakur et al. (2023) proposes that there are two drivers of digital disruption: technology-
induced and organization-induced drivers. In other words, digital technology alone cannot
improve organizational value much; rather, it is the use in a specific context that empowers
the organization to create value, e.g. involving a change in business models.
Vial (2019) argues that digital transformation is a process where digital technologies
create disruptions at the society and industry levels and trigger strategic responses from
organizations that affect the positive and negative outcomes of this process. Essentially,
digital technologies are described as inherent sources of disruption. According to Gartner
(2022), digital disruption is an effect that changes the fundamental expectations and
behaviors in a culture, market, industry, or process through digital capabilities. With
dynamic capabilities, firms sense disruptions, seize them (e.g. through strategic responses)
and reconfigure elements of their business model for digital transformation (Teece, 2007;
Vial, 2019).
Bradley, Loucks, Macaulay, Noronha, and Wade (2015) stresses that digital disruption
arises from digital technologies and business models on a value proposition of incumbent
firms. According to Skog et al. (2018), digital disruption is a type of digital technology-induced
environmental turbulence capable of producing industry-level upheaval. By using disruptive
technologies, digital disruption has the potential to overturn existing business models for
incumbent firms. However, many established companies are still sticking to their existing
business models reluctant to the disruptive changes. Matzler, Friedrich von den Eichen,
Anschober, and Kohler (2018) notes that for these companies, they may need to deploy digital
technologies for new business models to the advantage of their customers if they would
succeed in digital disruption.
Regarding the business model, DaSilva and Trkman (2014) stress that business model is
more appropriate to describe it as a managerial “philosophy”, rather than as a “approach”,
through which firms combine the resources and consequent transactions to strengthen their
dynamic capabilities rooted in the RBV and in the transaction cost economics. In this digital
environment, a business model is faced with the disruptive changes motivated by digital
technologies, such as information and communication technologies (ICT) in particular.
Digital transformation puts digital technologies at the core of business strategy where firms
find ways to refresh or replace an organization’s business model, leading to disruptive digital

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 DTS business models by implementing a new business logic to produce outcome and create value
(Warner & W€ager, 2019; Gong & Ribiere, 2021; Verhoef et al., 2021).

3.2 Resource integration from RBV and SDL

According to the modified foundational premise (FP9) from SDL, Vargo and Lusch (2008) and
Lusch, Vargo and Tanniru (2010) note that all social and economic actors are resource
integrators in networks through the combination of competences, relationships and
information. Specifically, Lusch and Vargo (2014) draw on a definition of service
ecosystems as “relatively self-contained, self-adjusting systems of resource-integrating
actors connected by shared institutional logics and mutual value creation through service
exchange.” Accordingly, resource integration can be defined as a continuous process where
actors combine and apply resources to produce the outcome for value creation
(Kleinaltenkamp et al., 2012; Bruce, Wilson, Macdonald, & Clarke, 2019).
In SDL, resources are categorized as operand and operant resources where operand
resources require activities to become valuable (e.g. physical natural resources, raw
materials, or physical products), while operant resources are often dynamic and intangible
(e.g. knowledge and skills) (Eletxigerra, Barrutia, & Echebarria, 2018). As for the
“technology”, it can play a dual role of operant and operand resources. Not only can
technology be an operant resource because it is constituted by dynamic resources (knowledge
and skills), but also serve as an appliance which conveys dynamic resources acting on other
resources (Akaka & Vargo, 2014; Lusch & Nambisan, 2015; Eletxigerra et al., 2018).
From the RBV, on the other hand, which addresses the valuable, rare, inimitable and
nonsubstitutable (VRIN) resources (Barney, 1991), firms integrate all tangible and intangible
assets and capabilities to implement competitive strategies related to performance where IT
assets can play a strategic and synergistic role to create IT-enabled resources (Lin & Wu,
2014; Pan et al., 2015). According to Wade and Hulland (2004), RBV have used different terms
to describe a firm’s resources including skills, competencies, assets and stocks where
capabilities can include skills such as technical or managerial ability, or processes. Barney,
Wright and Ketchen (2001) stresses that VRIN resources include a firm’s management skills,
its organizational processes and routines and the information and knowledge, which
distinguish them from tangible nonVRIN resources such as funding and office space.
Dynamic capability, in particular, addresses the important role in which firms can build,
integrate and reconfigure internal and external resources to cope with or adapt to the highly
volatile environment (Teece et al., 1997; Lin & Wu, 2014).
Based on RBV, IT is considered valuable organizational resources that can enhance
organizational capabilities and dynamic capabilities and eventually lead to firm-level
performance outcomes in its operational and management practices (Wernerfelt, 1984; Liang,
You, & Liu, 2010; Parida, Oghazi, & Cedergren, 2016). Specifically, IT resources can be
integrated with other nonIT resources into a complementary resource and then influence the
effectiveness of business processes and performance (Chen, 2012; Liang et al., 2010). Parida
et al. (2016) notes that ICT capabilities including the use for internal efficiency, use for
collaboration and use for communication, can influence the development of higher-order
(dynamic) capabilities.
Consistent with the view of RBV, firms can assemble and deploy IT-based resources,
including IT infrastructure, human IT skills and IT-enabled intangibles, in combination with
other firms’ resources (Bharadwaj, 2000; Wade & Hulland, 2004; Nwankpa & Datta, 2017). IT
capabilities are a combination of IT-related resources, skills and knowledge exercised
through business processes, that transform these resources and processes to new valuable
combinations and build new capabilities through learning resources for efficient creation of
desired performance (Stoel & Muhanna, 2009; Jantunen, Tarkiainen, Chari, & Oghazi, 2018).

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 From the SDL perspective, Lusch and Nambisan (2015) and Akaka and Vargo (2014) Resource
emphasize the dual role of IT, as an operant resource (skills and knowledge) and as an integration and
operand resource (raw materials or physical products), in digital service innovation both for
service providers (suppliers) and beneficiaries (customers) in creating value.
dynamic
Regarding the influence of resource integration on a firm’s value creation, therefore, the capabilities
RBV is parallel to the S-D logic in a sense. As Mele and Della Corte (2013) note, in comparison
with SDL, RBV mainly concentrates on the upstream concept with focus on resource
interaction within and between firms, while SDL pays attention to the downstream one with
focus on resource integration across actors. After the resource interaction or resource
integration, firms or actors are expected to produce their desired outcomes: competitive
advantage in RBV or value creation in SDL. As for the technology, it plays a dual role in
producing an output of and an input for human actions, as an operant resource and as an
operand resource for example, in digital transformation (Orlikowsky, 1992; Lusch &
Nambisan, 2015). This study illustrates the resource integration from RBV and SDL in
Figure 3.

3.3 Organizational capabilities: dynamic and ordinary capabilities

According to Loureiro, Ferreira and Sim~oes (2021), the dynamic capability came from Teece
et al. (1997) characterizing the set of resources through the RBV of Wernerfelt (1984),
subsequently adjusted by Barney (1991). Teece et al. (1997) note that dynamic capabilities are
the firm’s ability to integrate and reconfigure internal and external resources to shape rapidly
changing business environments. In other words, firms need dynamic capabilities to sense
opportunities and threats, seize these opportunities and the capacity and reconfigure the
underlying resources and assets, to remain competitive in the digital age (Teece, 2007, 2014;
Vial, 2019; Loureiro et al., 2021; Ellstrom, Holtstrom, Berg, & Josefsson, 2022; Li, 2022).
Ellstrom et al. (2022) stress that through digital technologies, dynamic capabilities and digital
transformation can reshape traditional businesses and require firms to respond to new
market opportunities.
Basically, dynamic capabilities are those referred to the higher-order capabilities
underpinned by organizational learning and managerial knowledge and skills resulting in
more valuable resource bases, which are different from lower-order capabilities resulting in
operational-level changes such as changes in managerial practices and technologies used,

Valuable
Resources
Operant
Outcomes Resources
Rare
Resources

Inimitable
Resources
Operand
Resources
Nonsubstitutable
Resources Technologies

Figure 3.
RBV Technology SDL Resources from RBV
and SDL
Source(s): Barney (1991); Akaka and Vargo (2014)

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 DTS including the routine activities and administration on a day-to-day basis (Teece, 2007, 2018;
Jantunen et al., 2018; Fainshmidt, Pezeshkan, Frazier, Nair, & Markowski, 2016; Gaviria-
Marin, Matute-Vallejo, & Baier-Fuentes, 2021). These routines can be two types: the
operational routines (employed in company activities) and dynamic capabilities (those
dedicated to altering the operational routines) (Zollo & Winter, 2002; Loureiro et al., 2021).
Stated differently, dynamic capabilities, e.g. higher-order capabilities, are a second-order
factor, while the ordinary capabilities are a first-order or zero-order factor which reflect
change in the firm’s operational capabilities including production process (Makkonen,
Pohjola, Olkkonen, & Koponen, 2014; Fainshmidt et al., 2016; Jantunen et al., 2018).
The relationship between the two levels, i.e. higher-order (dynamic) capabilities and lower-
order (ordinary) capabilities tend to be complementary, showing the impact of higher-order
capabilities on performance mediated by lower-order capabilities (Schilke, 2014; Fainshmidt
et al., 2016; Jantunen et al., 2018). Furthermore, dynamic capabilities can also act as a
mediating role in transforming resources, including VRIN and nonVRIN, into enhanced
performance (Wu, 2007; Lin & Wu, 2014). Schilke (2014) emphasizes the effect of higher-order
and lower-order capabilities on performance outcomes and develops two different models
whereas in the mediation model higher-order dynamic capabilities lead to an increase in
lower-order dynamic capabilities, whereas in the moderation model higher-order dynamic
capabilities affect the effectiveness of lower-order dynamic capabilities in increasing
performance. These impacting paths are different from the direct effect where both higher-
and lower-order capabilities produce performance outcomes.
Figure 4 duplicates the framework of Schilke (2014) which explains the relationship
between two levels of organizational capabilities, i.e. higher- and lower-capabilities and
produces their outcomes, i.e. competitive advantage. The relationship between two levels of
organizational capabilities can be a mediating and/or moderating role.

4. Conceptual framework and propositions

4.1 Theoretical framework and conceptual foundation
Based on the previous research discussed above, we present a conceptual framework
depicted in Figure 5. This model aims to understand the process of digital transformation and
its antecedents of firms’ performance in the business environments. Warner and W€ager
(2019) note that the digital transformation has been conceptualized as the use of new digital
technologies to create new business models. Vial (2019) states that firms should build their
organizational dynamic capabilities to support the ongoing digital transformation where
digital technologies can create an impetus for organizations to gain their competitive
advantage. Moreover, Gong and Ribiere (2021) also identifies the key elements of digital
transformation: technologies, resources, capabilities and outcomes. In this study, therefore,

Higher-Order
(Dynamic) Capabilities

Mediator Moderator
Figure 4.
Higher-order (dynamic)
capabilities and lower- Lower-Order Outcomes:
order (ordinary) (Ordinary) Capabilities Competitive Advantage
capabilities
Source(s): Schilke (2014)

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 Resources Integration Organizational Capabilities Outcomes Resource
integration and
Technology dynamic
VRIN capabilities
Resources
Higher-Order Lower-Order
(Dynamic) (Ordinary) Performance
Capabilities Capabilities
Non-VRIN
Resources Figure 5.
A conceptual
framework
Source(s): Author’s work

we build a conceptual framework by reorganizing the key elements through the business
model based on theories and frameworks from the extant literature including RBV and SDL.
In this framework, we build three blocks: resource integration, organizational capabilities
and outcomes, exploring the impact of resource integration on outcomes through
organizational capabilities. For resource integration, we argue that firms possess two main
types of resources: VRIN resources and nonVRIN resources which will have influences on
their dynamic capabilities based on RBV. IT-based resources can play a role in moderating
the effect of resource integration in combination with VRIN resources and nonVRIN
resources. As for the dynamic capabilities, we argue that firms’ capabilities have two levels:
higher-order capabilities and lower-order capabilities which will convert these resources
through the capabilities into improved organizational performance. Especially, lower-order
capabilities play a role in mediating the effect between higher-order capabilities and
performance, as shown in Figure 5.

4.2 Propositions
4.2.1 Resource integration and dynamic capabilities in digital transformation. In digital
transformation, resource integration is the means by which firms reconfigure various
resources and activities within the ecosystem to cocreate value enabled by technology,
especially digital or information technology (Lusch & Nambisan, 2015; Sklyar, Kowalkowski,
S€orhammar, & Tronvoll, 2019). From RBV, Pan et al. (2015) notes that by creating new
resources to obtain congruence with the volatile environment, the dynamic capabilities can
create new forms of competitive advantage to improve firms’ performance. Different from
nonVRIN resources, VRIN is central to RBV in providing sustainable competitive advantage
where VRIN resources may be able to organize nonVRIN resources (e.g. physical resources
and financial capital) in dynamic and fast-changing environments (Lin & Wu, 2014; Van
Rijnsoever & Eveleens, 2021; Cuthbertson & Furseth, 2022).
Both VRIN and nonVRIN resources have impacts on firm’s dynamic capabilities, just VRIN
resources will have a stronger impact than nonVRIN resources as the latter are not rare,
inimitable or nonsubstitutable (Wade & Hulland, 2004; Lin & Wu, 2014; Van Rijnsoever &
Eveleens, 2021). Specifically, VRIN resources are primary components for firms to achieve their
sustained competitive advantage and nonVRIN resources are secondary components to produce
positive outcomes; both will enhance their performance outcomes through the mediating effect of
organizational capabilities. Drawing upon Lin and Wu (2014), we consequently offer the following
two propositions to establish the relationships between organizational capabilities and two
different types of resources, i.e. VRIN and nonVRIN resources.

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 DTS P1. (Strong form). VRIN resources have a positive effect on a firm’s higher-order
(dynamic) capabilities.
P2. (Weak form). NonVRIN resources have a positive effect on a firm’s higher-order
(dynamic) capabilities.
4.2.2 Resource integration and dynamic capabilities through digital technology. In SDL, digital
technology can play a dual role of operant and operand resources both for its customers and
suppliers (firms) in creating value, Recently, digital technology has shifted from operand
resources to operant resources as it incorporates more human-like capabilities and
increasingly acts without human intervention (Lusch & Nambisan, 2015; Akaka & Vargo,
2014; Sklyar et al., 2019). Past research views information systems (IS) as complementary
resources that enhance the value of other organizational resources and capabilities. For
example, Bharadwaj, Bharadwaj, and Bendoly (2007) argue that a firm’s IS capabilities,
integrated with other organizational resources including marketing and manufacturing
processes, will be complementary to manufacturing performance.
Digital technology is viewed as complementary resources integrated with VRIN and
nonVRIN resources and is often central to the integration process, enhancing organizational
capabilities and then improving firm performance (Bharadwaj, 2000; Liang et al., 2010; Chen,
2012). Digital transformation requires a reconfiguration of various resources where digital
technology plays a central role in the creation for a change of business processes and business
models bringing on reinforcement of disruptions in industries (Skog et al., 2018; Vial, 2019;
Thakur et al., 2023). Cuthbertson and Furseth (2022) notes that some of digital resources such
as data and algorithms can be VRIN relying on the operant resources that provide the
dynamic capabilities to innovate VRIN digital resources.
For this reason, this study views digital technology as a moderator which affects the
strength of the relationship between resources and dynamic capabilities. Consequently, we
develop the following propositions.
P3a. The association between the VRIN resources and higher-order (dynamic)
capabilities is moderated by digital technology.
P3b. The association between the nonVRIN resources and higher-order (dynamic)
capabilities is moderated by digital technology.
4.2.3 Relationship between higher-order capabilities and lower-order capabilities. In this study,
we argue that there are two levels of organizational capabilities: higher-order capabilities and
lower-order capabilities from RBV which are complementary and affect firm performance
(Karna, Richter, & Riesenkampff, 2016; Drnevich & Kriauciunas, 2011). Lower-order
capabilities are more functional and operational mainly referred to routines that reconfigure
the organizational resource base, while higher-order dynamic capabilities are more
strategical with core competencies mainly referred to routines that reconfigure lower-order
capabilities (Schilk, 2014; Wojcik, 2015; Verreynne, Hine, Coote, & Parker, 2016). Helfat and
Winter (2011) note that past studies have distinguished higher-order capabilities from lower-
order capabilities where lower-order capabilities enable a firm to make a living in the present,
while higher-order capabilities alter how it currently makes its living.
Studies also suggest that higher-level capabilities mediate between resources and
performance where resource integration improves firm performance through dynamic
capabilities (Wu, 2007; Lin & Wu, 2014; Fainshmidt et al., 2016). Moreover, past research
suggests that higher-level capabilities have an impact on lower-level capabilities and in turn
on performance outcomes. In a sense, dynamic and ordinary capabilities are complementary
at two levels, from higher-level down to lower-level capabilities for improvement (Karna et al.,
2016; Jantunen et al., 2018). In other words, the impact of higher-level capabilities on outcomes

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 may be mediated by lower-level capabilities (Schilke, 2014; Fainshmidt et al., 2016; Jantunen Resource
et al., 2018; Zhou, Zhou, Feng, & Jiang, 2019). Consequently, this study develops the following integration and
proposition.
dynamic
P4. Higher-order capabilities have a positive effect on lower-order capabilities. capabilities
According to Vial (2019), digital transformation is a process where digital technologies create
disruptions from resource integration to organizational capability and lead to the positive
and negative outcomes of this process. In SDL, such outcomes of resource integration are
referred to the cocreation of value (Vargo & Lusch, 2008; Kleinaltenkamp et al., 2012). From
RBV (or the dynamic capability theory, a special case of RBV), such outcomes are referred to
the competitive advantages (Barney, Ketchen, & Wright, 2021; Cuthbertson & Furseth, 2022)
which lead to superior long-term performance (Barney, 1991; Wu, 2007; Lin & Wu, 2014;
Jantunen et al., 2018). Although Wojcik (2015) emphasizes that RBV is criticized for an
inability to explain sources of value creation, achieving competitive advantage, or superior
performance, this study still adopts the RBV and considers the firm outcomes of digital
transformation as improved organizational performance; financial return, operational
excellence and marketing performance, for example (Ilmudeen, Bao, Alharbi, & Zubair, 2021).
Schilke (2014) proposes two different models in which firms can utilize the organizational
capabilities to improve performance. In the mediation model, higher-order capabilities lead to
an increase in lower-order capabilities, while in the moderation model, higher-order
capabilities affect the effectiveness of lower-order capabilities in increasing performance. In
this study, we argue the mediation effect because many studies have suggested that dynamic
capabilities are not directly linked to firm performance (Makkonen et al., 2014; Zhou et al.,
2019; Ilmudeen et al., 2021; Kalubanga & Gudergan, 2022). Consequently, this study develops
the following propositions.
P5. Lower-order capabilities have a positive effect on firm performance.

5. Discussions and conclusions

5.1 Key findings and discussion
Past research has presented various definitions of digital transformation with different focus
on the digital technologies, business processes, organizational capabilities, business models,
customer relations, value creation and performance across economies, businesses, societies,
technologies and organizations because of lacking a universal and comprehensive
understanding (Gong & Ribiere, 2021; Van Veldhoven & Vanthienen, 2022; Kraus et al.,
2022; Konopik et al., 2022). In addition, scholars have built different frameworks in explaining
the process of digital transformation such as Warner and W€ager (2019), Vial (2019), Gong and
Ribiere (2021), Van Veldhoven & Vanthienen (2022), Verhoef et al. (2021), Imran et al. (2021),
Wengler et al. (2021), Konopik et al. (2022), Kraus et al. (2022).
To put these different conceptual frameworks into practice, other authors collect original
data to validate the frameworks and provide an overall and comprehensive understanding of
these notions, avoiding increased risk of over-interpreting the phenomenon. Most of the
empirical studies in digital transformation have adopted qualitative research such as case
studies and in-depth interviews (e.g. Warner & W€ager, 2019; Singh et al., 2020; Magistretti
et al., 2021). For example, Warner and W€ager (2019) conduct multiple case studies including
automotive, banking and Telecoms industries; Singh et al. (2020) chooses a multiple-case
study design including a retailer, a publishing, a consulting and a financial services company,
allowing for cross-case analysis; Magistretti et al. (2021) focus on consulting organizations
including Design Group Italia and IBM iX. Comparatively, there seems to be relatively limited
empirical research undertaken to use quantitative methods (e.g. Li, 2022; Singh et al., 2021).

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 DTS Verhoef et al. (2021) explain that digital transformation is inherently linked to strategic
changes in the business model. As stressed by DaSilva and Trkman (2014), “business model”
is described as a managerial “philosophy”, rather than as a “approach”. It is understandable,
therefore, that past research adopts a conceptual framework or uses qualitative research
more than quantitative methods in the context of digital transformation.
In this study, we develop a conceptual framework by adopting a different perspective in
restructuring a process of digital transformation through paths from resources integration,
organizational capabilities, to outcomes. Specifically, it reorganizes the elements of digital
transformation, including resources, technology, capabilities and performance, into a process
where firms integrate these resources, build new capabilities and transform them into enhanced
performance. This paper offers a coherent discussion of digital transformation and explains the
process of digital transformation, thus advancing prior work. Drawing on RBV, it provides a
more holistic perspective that has been linked to resource integration, organizational
capabilities and outcomes at the firm level. In this way, we can strengthen the theoretical basis
diminishing implicitness associated with the current perspective of digital transformation.

5.2 Theoretical contributions and implications

The primary contribution to this study is connecting the process of digital transformation
through which firms integrate resources, i.e. digital technologies and VRIN and nonVRIN
resources as well, based on RBV and SDL in order to develop organizational dynamic
capabilities. Although some authors (e.g. Baraldi, Gressetvold, & Harrison, 2012; Line &
Runyan, 2014; Hollebeek, 2019) have provided comparisons between RBV and SDL in the
organizational resource interaction, they have yet built on the digital transformation closely.
Different from past research, this study recognizes the importance of digital technologies as a
valuable resource which incorporates them into VRIN resources from RBV and SDL and links
the process of digital transformation. This has become the major contribution of this study.
Regarding the resource integration in this study, RBV emphasizes the core VRIN attributes
and thus reorganizes their nonVRIN resources in providing sustainable competitive advantage
for firms (Lin & Wu, 2014; Cuthbertson & Furseth, 2022). As for technology resources,
Cuthbertson and Furseth (2022) notes that digital resources can be VRIN resources, some of
which are categorized into operant resources (e.g. algorithms), while some others are operand
resources (e.g. data). If firms can continually innovate and develop digital resources, their
competitive advantages can be created and retained. Compared with RBV, the resources in SDL
are mainly those of operant resources, operand resources and technologies where technologies
can be viewed as an operant resource composed of dynamic resources bringing about the
production of new operant resources and thus create value for actors (Akaka & Vargo, 2014;
Lusch & Nambisan, 2015). With this dual role, this study considers technology resources a
moderating role through organizational capabilities to produce positive outcomes.
Moreover, this study develops two levels of organizational capabilities, which differentiates
higher-order capabilities from lower-order capabilities. Lower-order capabilities are operational
routines (Verreynne et al., 2016; Jantunen et al., 2018), while higher-order capabilities are
dynamic capabilities such as sensing, seizing and transforming capabilities (Teece et al., 2014,
2018; Vial, 2019), or learning, integration and reconfiguration capabilities (Teece et al., 1997; Lin
& Wu, 2014; Farzaneh, Wilden, Afshari, & Mehralian, 2022). Moreover, this study argues that
higher-level (dynamic) capabilities on performance may be mediated by lower-level capabilities
(Fainshmidt et al., 2016; Jantunen et al., 2018; Zhou et al., 2019). Regarding the outcomes, in RBV,
VRIN resources provide sustainable competitive advantage which is related to performance
(Newbert, 2007; Wu, 2007; Lin & Wu, 2014), different from those in SDL where operant and
operand resources provide value creation (Akaka & Vargo, 2014; Lusch & Nambisan, 2015) as
the outcomes from digital transformation.

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 5.3 Limitations and further research Resource
Whereas in this study we focus on different perspectives from past research, future research integration and
still might need to extend the understanding of the evolution of business processes for digital
transformation. For example, although this study focuses on digital technologies bringing
dynamic
about disruption, researchers could investigate the more explicit role of resource integration, capabilities
e.g. moderating, mediating or direct effect, on organizational capabilities and, therefore, need
to identify appropriate integration practices. Indeed, considerable research has viewed digital
technologies as a role of direct effect (e.g. Liang et al., 2010; Chen, 2012; Parida et al., 2016) for
firms to produce outcomes, more evidence is needed for further validation. Digital
technologies itself is another issue. In practice, for example, many authors view digital
technologies as different types of capabilities ranging from IT capabilities (e.g. Liang et al.,
2010), ICT capabilities (Parida et al., 2016), IT-enabled resources (e.g. Chen, 2012), IS
capabilities (e.g. Bharadwaj et al., 2007), to digital strategy (Kraus, Vonmetz, Orlandi, Zardini,
& Rossignoli, 2023). Future research is needed to further advance the understanding of digital
technologies and disruption in the context of digital transformation.
Moreover, researchers could need to investigate the hierarchy of organizational capabilities
with different levels. For example, Ambrosini, Bowman, and Collier (2009) propose four levels of
organizational capabilities: resource base, incremental dynamic capabilities, renewing dynamic
capabilities and regenerative dynamic capabilities, while Verreynne et al. (2016) suggest three
levels: operating capabilities, lower-order dynamic capabilities and higher-order dynamic
capabilities, in explaining firms’ abilities and competences. Despite the different levels of
organizational capabilities, Schilke (2014) reminds that these levels can be either a mediator or a
moderator. More evidence is needed for researchers to conduct empirical studies further to
provide in-depth insight into the different dimensions. This way, this perspective will help to
identify more meaningful theoretical and practical implications of digital transformation.

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Ming-Hsiung Hsiao can be contacted at: msshiaw@[Link]

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