HOW DIGITAL CAPABILITIES DRIVE INNOVATION IN BANKING: EXTENDING THE RESOURCE-BASED VIEW IN THE ERA OF DIGITAL TRANSFORMATION

Abstract This study examines how digital transformation leads to the delivery of innovation outcomes in highly regulated banking systems, specifically the banking system in Vietnam, and the impact it has on commercial banks and their operations. With the Resource-Based View and Resource Orchestration Theory derived from the study, we relate digital transformation to digital innovation, digital service and big data analytics capability, barriers to digital innovation, collaboration, and the ecosystem in relation to digital innovation and performance. The study uses survey data from 388 middle- and senior-level managers and analyzes the data through Partial Least Squares Structural Equation Modeling (PLS-SEM). It can be shown that digital transformation and digital innovation positively influence digital innovation performance through digital service capability. Big data analytics enables this impact as well. These aspects are improved by collaboration in the innovation system that allows overcoming these barriers while decreasing them when they do not and can also lead to greater work capability. Our study promotes this link by providing a detailed framework that explains how digital capabilities and external collaboration intersect to inform digital innovation performance in a regulated banking environment from an ecosystem perspective.