Relationship between Digital Transformation and Innovation Capability in Driving Entrepreneurial Competitiveness

This conceptual paper looks into the connection between e-transformation and the ability to innovate as an element to create business competitiveness. The objective of the research is to investigate the influence of multidimensional digital transformation efforts such as digital strategy, digital technology adoption, digital culture, and digital capabilities on the level of innovation capability, consequently, in the level of entrepreneurial competitiveness in the terms of market performance, financial performance, and growth potential. The four objectives of the research assist in the study to investigate the relationship between digital transformation and entrepreneurial competitiveness, evaluate the effect of innovation capability on entrepreneurial competitiveness, investigate the effect of digital transformation on innovation capability, and provide the strategies to utilize digital transformation and innovation capability to establish sustainable competitive advantage. Through conceptual research design, the paper integrates the findings of 54 academic publications (journals, books, conference papers) be it Resource-Based View (RBV), Dynamic Capabilities Theory, or the Technology-Organization-Environment (TOE) framework. The research forms a conceptual framework that shows the hypothesized connections between digital transformation, innovation capability and entrepreneurial competitiveness. The major results also indicate that digital transformation is a capability driver of innovation that mediates its impact on entrepreneurial competitiveness with the necessity to strategize and invest in digital capabilities and promote the culture of innovation in entrepreneurial ventures. The research also adds to the theoretical knowledge and provides management advice to SMEs and startups interested in using digital and innovative strengths to create sustainable competitive advantage.