Dynamic capabilities for open innovation: knowledge management, digitalisation and leadership

Purpose This study introduces the Dynamic Capabilities for Open Innovation (DCOI) framework, showing how knowledge management (sensing), digitalisation (seizing) and leadership (transforming) jointly enable firms to integrate external knowledge into innovation while managing internal barriers. Design/methodology/approach An abductive, qualitative multi-case design was applied across nine large FMCG firms. Data included 47 semi-structured interviews supported by archival materials (annual reports, digital archives and innovation-related documents). Analysis followed grounded theory and the Gioia methodology using NVivo 12, and triangulation across sources enhanced validity and analytical transparency. Findings Open innovation relies on three dynamic capabilities: knowledge management for sensing external knowledge, digitalisation for seizing and sharing it and leadership for transforming culture and strategy to embed openness. However, managerial and employee barriers can weaken capability outcomes. The study extends the dynamic capabilities view by showing how these mechanisms interact in practice. Research limitations/implications The study focuses on large FMCG firms, which may limit generalisability to SMEs or technology-intensive sectors. Future research could test the DCOI framework quantitatively or longitudinally to examine capability evolution across contexts. The study contributes to dynamic capabilities research by providing empirically grounded micro-foundations that explain how open-innovation capabilities are developed, renewed and constrained by behavioural and organisational factors. Practical implications Managers should view openness as a systemic organisational capability, not a one-off initiative. Firms are advised to (1) Institutionalise knowledge routines for sensing external ideas. (2) Develop digital strategies and training programmes for effective seizing. (3) Empower leadership to align culture, processes and strategy toward openness. Establishing Independent Knowledge Processing Departments (IKPDs) and addressing managerial and employee barriers can further enhance absorptive capacity and innovation agility. Originality/value This study offers the first empirically validated DCOI framework linking knowledge management, digitalisation and leadership as a dynamic capability triad that operationalises open innovation. It provides new theoretical insight into the micro foundations of sensing, seizing and transforming, identifies behavioural moderators that explain underperformance in capability-rich firms and offers actionable pathways for embedding openness across organisational levels.