Digital transformational outsourcing: A necessity analysis of service provider capabilities

Capabilities enable performance, but how does their absence constrain performance? We ask this critical question as firms continuously adapt to the fast-evolving environment, refreshing their capabilities. Studying outsourcing service provider capabilities in digital transformational outsourcing in the IT-enabled business services industry, we explore the capability constraining query by adopting a necessary but not sufficient logic. By developing and testing necessity hypotheses, we identify an inherent hierarchy in dynamic capabilities, depicting how different levels of capabilities constrain performance to varying levels. The above enables us to guide an order of capability development in provider firms.