This study proposed the integrative model of dynamic dominant logic (DL) with exploitation (EP) and exploration (ER) as a pattern of actions in endeavoring firm performance (FP). This study also intended to explain the multiple patterns of DL in creating technical and evolutionary fitness simultaneously.
This study used a cross-sectional quantitative analysis of the Indonesian commercial banking population facing digital transformation and was analyzed using covariance-based structural equation modeling through parceling.
The model confirmed that DL positively affects EP and ER. It also revealed that DL indirectly impacts FP through EP, indicating changes in the traditional banking business through the strong acceptance of “new realities” in adapting to the rapid growth of technology. Hence, this study discovered that during the recent banking digital transformation, the beneficial inertia of the technical pattern of action might lose effectiveness in creating superior performance.
DL is vital in locking short-term performance while maintaining long-term performance opportunities through EP and ER to promote digital transformation. Accordingly, it induced banks to adopt new technology for value creation and fortifying competitive advantage.
This study provided a theory about how DL links the firm's decision-making process by promoting multiple patterns of action in achieving technical and evolutionary fitness. It highlighted the DL as a resource conceptualization that promotes resource development through EP and ER as microfoundation of dynamic capabilities during the tension of institutionalization and digital transformation.
