Organizational inertia, digital capabilities, digital transformation, and firm competencies

In responding to this digitally disruptive era, firms have become actively managing their digital transformation as well as scholars have become increasingly interested in the digital transformation phenomenon. However, the digital transformation change process remains largely unknown since most industries have not yet achieved digital transformation success. This study argues that organizational inertia is a prerequisite for firm competencies through digital capabilities and digital transformation.Therefore, this study aims to investigate the impact of organizational inertia on digital capabilities and digital transformation to optimize firm competencies. The dataset was obtained from a quantitative survey of 125 firms in Indonesia, which was processed using the Structural Equation Model (SEM). We find that organizational inertia indirectly impacts firm competencies through digital capabilities and digital transformation. Organizational inertia impacts digital capabilities, not digital transformation, whereas digital capabilities impact digital transformation and a firm’s competencies. Nevertheless, organizational learning, capabilities, and resources are not the antecedents of organizational inertia.This study en-riches the organization behavior and strategic management literature by examining the impact of organizational inertia on the success of digital transformation, and its impact on firm competencies. Our findings embrace practices of the digital transformation process by enhancing firms’ digital capabilities, particularly in digital transformation response, identification of digital opportunities, innovative digital technology product development, acquisition, and mastering state-ofthe-art digital technology.