Hierarchical Dynamic Capabilities in Digital Transformation: An MNE Orchestration Framework

<p><strong>ABSTRACT Rapid technological advancements and global economic shifts have catalysed an era of digital transformation, confronting multinational enterprises (MNEs) with unprecedented challenges and opportunities. While only 22% of organisations achieve and sustain improved performance through digital transformations, the strategic significance of this shift is evident, with digital platforms expected to play a crucial role in market adaptation for 75% of industry leaders by 2025. This study develops a comprehensive theoretical framework that integrates dynamic capabilities, orchestration processes, and business model innovation to understand how MNEs successfully navigate digital transformation.</strong></p><p>Drawing on the systematic analysis of five manufacturing MNEs over multiple years, this research examines three critical areas: (1) how different levels of dynamic capabilities interact with ordinary capabilities in enabling digital transformation; (2) the mechanisms through which manufacturing MNEs orchestrate digital transformation through product-to-solution centric models, customer engagement, and ecosystem participation; and (3) how these orchestration processes drive business model innovation through value proposition reconfiguration, data-driven service evolution, and revenue stream transformation. Employing a post-positivist paradigm, this study conducts a longitudinal analysis of multiple cases, examining annual reports from leading industrial MNEs across wires & cables and bearing manufacturing industries over an eight to eleven-year period.</p><p>The study advances theoretical understanding across three core domains. First, it extends the dynamic capabilities framework by revealing distinct roles and interactions of different capability levels, identifying a 'cross-border capability enhancement cycle' between dynamic and ordinary capabilities. Second, it advances the orchestration framework by establishing distinct patterns in how manufacturing MNEs orchestrate digital transformation and revealing specific mechanisms for global orchestration. Third, it contributes to business model innovation literature by identifying three transformative patterns in manufacturing contexts. These insights offer important implications for both theory and practice in digital transformation and international business.</p><p>Keywords: Multinational Enterprises (MNEs), Digital Transformation, Dynamic Capabilities, Orchestration, Business Model Innovation</p>