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At the Crossroads between Digital Innovation and Digital Transformation


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The paper presents the report of a Professional Development Workshop (PDW) that addressed questions at the intersection of digital innovation and digital transformation at ICIS 2019 in Munich, Germany. The PDW was designed to share insights into (a) the current state of research on digital innovation, (b) the current state of research on digital transformation, and (c) the methodological and theoretical challenges in conducting research on digital innovation and/or digital transformation. Accordingly, the PDW featured three keynotes on digital innovation and digital transformation as a basis for interactive roundtable discussions where ongoing research projects presented by accepted author groups were discussed. Across the three keynotes and the roundtable discussions, some common patterns emerged. In particular, reoccurring themes included the challenge of balancing new and old elements of organization and technology in digital innovation and transformation as well as methodological challenges related to empirical research design and choice of theories. In this paper, we present a synthesis of ideas developed prior to, during, and after the PDW. This synthesis also results in a couple of suggestions for future research.
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At the Crossroads between Digital Innovation and Digital Transformation
Katharina Drechsler
German Graduate School of Management and Law
Robert W. Gregory
McIntire School of Commerce
University of Virginia
Heinz-Theo Wagner
German Graduate School of Management and Law
Sanja Tumbas
IESE Business School
Please cite this article as: Drechsler, Katharina; Gregory, Robert W.; Wagner, Heinz-Theo; Tumbas, Sanja: At the
Crossroads between Digital Innovation and Digital Transformation, Communications of the Association for Information
Systems (forthcoming), In Press.
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Research Paper ISSN: 1529-3181
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At the Crossroads between Digital Innovation and
Digital Transformation
Katharina Drechsler
German Graduate School of Management and Law
Robert W. Gregory
McIntire School of Commerce
University of Virginia
Heinz-Theo Wagner
German Graduate School of Management and Law
Sanja Tumbas
IESE Business School
The paper presents the report of a Professional Development Workshop (PDW) that addressed questions at the
intersection of digital innovation and digital transformation at ICIS 2019 in Munich, Germany. The PDW was designed
to share insights into (a) the current state of research on digital innovation, (b) the current state of research on digital
transformation, and (c) the methodological and theoretical challenges in conducting research on digital innovation and/or
digital transformation. Accordingly, the PDW featured three keynotes on digital innovation and digital transformation as
a basis for interactive roundtable discussions where ongoing research projects presented by accepted author groups
were discussed. Across the three keynotes and the roundtable discussions, some common patterns emerged. In
particular, reoccurring themes included the challenge of balancing new and old elements of organization and technology
in digital innovation and transformation as well as methodological challenges related to empirical research design and
choice of theories. In this paper, we present a synthesis of ideas developed prior to, during, and after the PDW. This
synthesis also results in a couple of suggestions for future research.
Keywords: Digital Innovation, Digital Transformation.
At the Crossroads between Digital Innovation and Digital Transformation
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1 Introduction
The burgeoning literature stream on digital innovation has shed light on the unique characteristics or
properties of digital technologies, their flexibility, malleability, and so forth (e.g., Kallinikos, Aaltonen, &
Marton, 2013). Extant literature has also identified how digital technologies through these unique properties
offer new opportunities for the creation of new infrastructures, products, and business models, reshaping
ways of organizing for innovation along the way (Yoo, Boland, Lyytinen, & Majchrzak, 2012). These topics
have been the focus of research about digital innovation (Nambisan, Lyytinen, Majchrzak, & Song, 2017;
Yoo, Henfridsson, & Lyytinen, 2010), which is defined as “the creation of (and consequent change in) market
offerings, business processes, or models that result from the use of digital technology” (Nambisan et al.,
2017, p. 224).
At the same time, however, digital technologies not only enable unconstrained innovationthe predominant
focus of digital innovation research thus farbut through a process called IT consumerization also
significantly alter the mindset and behaviors of consumer-customers and consumer-workers within the
environment of incumbent firms (Gregory, Kaganer, Henfridsson, & Ruch, 2018), potentially giving rise to
the digital transformation of the entire organization, including fundamental changes in elements of enterprise
technology, organizational structure and identity, value proposition and business strategy (Vial, 2019;
Wessel, Baiyere, Ologeanu-Taddei, Cha, & Jensen, 2020). This phenomenon of digital transformation
inside incumbent firms is unique due to socio-technical inertia (Schmid, Recker, & Vom Brocke, 2017),
which gives rise to significant tensions between old and new elements of organization and technology as
the focal incumbent firm seeks the right balance between building upon and destroying the past to evolve
and adapt to the digitized environment (Gregory, Keil, Muntermann, & Mähring, 2015). Thus, digital
transformation can be defined as a process whereby IT consumerization forces an incumbent firm to deal
with socio-technical inertia and resolve tensions between old and new elements of organization and
technology to adapt to changes in environmental conditions (i.e., customers, competition, technology,
regulation, etc.) shaped by digital innovation.
Despite these salient differences between digital innovation and digital transformation, there are also strong
connections between the two phenomena. Successive waves of digital innovation within an industry or at
the level of an individual firm and its ecosystem may lead to a fundamental transformation of IS architecture
and organization (Gregory et al., 2015), structures, executive roles and overall mindset for leading digital
initiatives (Tumbas, Berente, & vom Brocke, 2018), depending on the influence of barriers such as inertia
and resistance to change (Vial, 2019). In other words, digital innovation resulting from and involving the
experimental and exploratory use of digital technology is a major driving force of digital transformation
initiatives inside incumbent firms, manifesting itself within the firm’s environment in terms of
consumerization, democratization, and new platform business logics. We will explain these forces in this
The importance of taking stock of what we know about digital innovation and shedding more light on what
is unique about the novel phenomenon of digital transformation compared to IT function-driven and
enterprise systems-enabled organizational transformations of the past (Besson & Rowe, 2012) is
underscored by the recent emphasis in the literature to expand the research agenda on digital innovation
to focus also on digital transformation (Hinings, Gegenhuber, & Greenwood, 2018; Vial, 2019).
In this paper, we report on a Professional Development Workshop (PDW) at ICIS 2019 in Munich, Germany
that focused on questions at the crossroads between digital innovation and transformation across multiple
levels of analysis, including individual, organization, and society. Digital transformation within an incumbent
firm will likely involve large-scale change away from the hierarchy and a shift toward a more distributed and
networked form of organization. By exploring how and why this new organizing logic of digital innovation
impacts and transforms incumbent firms, this paper addresses questions from four different areas discussed
at the PDW: First, the paper explores why the new logic of digital innovation, manifesting in a more
distributed and networked form of organization, triggers a digital transformation in incumbent firms. Second,
it examines the drivers of this digital transformation in incumbent firms’ immediate environment, such as
consumerization, democratization and new business logics. Third, the paper is concerned with questions
about how these drivers may under certain conditions alter the structure, strategy, culture, competencies,
skills and technology platforms of incumbent firms. Fourth, the paper discusses and debates open questions
on the trajectories of digital transformation journeys inside incumbent firms. In addition, the paper
summarizes three keynotes on digital innovation and transformation at the PDW and discusses
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commonalities across these keynotes. The paper outlines the roundtable discussions as well as participants’
key learnings. Finally, the paper highlights potential avenues of future research.
2 Digital Innovation Inside Incumbent Firms: Digital Transformation
Much is known about the triggers, processes, and outcomes of digital innovation (Fichman, Dos Santos, &
Zheng, 2014; Nambisan et al., 2017) outside the boundaries and context of incumbent firms in established
industries. Scholars across multiple disciplines have started to shed light on new ways of organizing, new
business models, and a new generation of digital technology that in many ways has enabled and fueled
these developments, without incumbent firms in established industries controlling much or any of them (Yoo
et al., 2012). In turn, these new developments have started to put incumbent firms across a variety of
traditional industries (e.g., media and entertainment, banking and finance, automotive, retail) under
significant pressure to renew themselves as their external environment has started to be characterized by
even greater velocity of change, uncertainty, complexity, and ambiguity than before.
Today, the phenomenon of digital innovation is no longer just associated with new elements of organization
and technology (e.g., new technology-enabled products and services including digital-first experiences, new
business models including platform businesses, new enabling digital technologies, new ways of organizing
such as crowdsourcing, etc.) that emerges outside the realm of influence, control and immediate relevance
for incumbents in traditional industries. Instead, digital innovation impacts and is embraced by incumbent
firms (Svahn, Mathiassen, & Lindgren, 2017), resulting in fundamental changes of existing or old elements
(e.g., established hierarchical structures, established organizational cultures, established competencies and
sets of enabling resources) (Gregory et al., 2015). In sum, digital innovation inside incumbent firms includes
a wider range of change processes and phenomena that go beyond the emergence of a new organizing
logic of digital innovation (Yoo et al., 2010). These are captured in the nascent literature on digital
transformation (Vial et al. 2019).
One useful metaphor, though certainly not the only one, to better understand this emerging topic of digital
transformation of incumbent firms is what Prof. Michael Tushman from Harvard Business School once
referred to in an interview as “the interface where Chandler meets Benkler.” Throughout three influential
books, Strategy and Structure (1962), The Visible Hand (1977) and Scale and Scope (1990), Alfred
Chandler (1918-2007) made significant contributions to the development of the theory of the industrial-age
firm (Wilson & Toms, 2012). Many firms today still follow the basic principles described in Chandler’s seminal
works. On the other hand, in his work on ‘The Wealth of Networks How Social Production Transforms
Markets and Freedom,’ Yochai Benkler describes the emergence of the networked information economy as
the new epicenter of economic and social production (Benkler, 2006). At the heart of this recent
development is the democratization of access to digital technology, manifested in the advance of the Internet
and pervasive networks, which has given rise to radically more decentralized patterns of nonmarket
production in the information (e.g., financial services, software) and cultural (e.g., films, music) sectors.
Similarly, the rise of peer-to-peer, large-scale and collaborative forms of information and cultural production
highlights new nonproprietary motivations and organizational forms that have been captured by Eric von
Hippel’s notion of user-driven, democratized innovation (Chesbrough & Rosenbloom, 2002; von Hippel,
1978, 2005). Underlying these fundamental shifts in social and economic production is the remarkable
evolution of digital technology as described by IS scholars (e.g., Kallinikos et al., 2013). According to Benkler
(2006), an important consequence of this digital environment is enhanced autonomy, that is, the practical
capacities of individuals to do more for and by themselves, in loose commonality with others, and without
being constrained by traditional hierarchical models of social and economic organization. However, this
viewpoint overlooks the fact that most individuals are members of formal organizations that operate within
the market sphere. These organizations, typically also referred to as incumbents, operate according to the
traditional logics of strategy and structure as explained, for example, by Alfred Chandler (Chandler, 1962,
1977, 1990).
To date, we have very little understanding in the literature about the interface between the Chandlerian
world of large incumbent organizations and the Benklerian networked world of new forms of organizing.
Although scholars across various disciplines have started to explore digital innovation and digital
transformation processes in incumbent firms, we still have little research that explores the phenomena
across multiple levels and institutions, and spans beyond the boundaries of the respective discipline. We
are, one could say, at the crossroads between digital innovation and digital transformation. Therefore, nearly
10 years after the seminal research commentary by Yoo et al. (2010), it is time for our field to pay more
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attention not only to the new organizing logic, but also how and why certain aspects of this new organizing
logic of digital innovation drive changes and potentially a digital transformation of the structure, strategy,
culture, competencies, skills, and technology platforms of incumbent firms in established industries.
3 Drivers of Digital Transformation
A recent review of the emerging literature on digital transformation by Gregory Vial provides an initial
integrative understanding of digital transformation (Vial, 2019). This review and synthesis of knowledge that
has been accumulated thus far is a useful point of departure for conducting further work at the intersection
between digital innovation and IT-driven transformation of incumbent firms. An underlying assumption of
the following description of these transformation drivers is that incumbent firms tend to change along
evolutionary pathways during times of environmental stability but may periodically carry out more
revolutionary and fundamental organizational change during times of high environmental velocity of change
(Gersick, 1991; Romanelli & Tushman, 1994; Tushman & Anderson, 1986; Tushman & Romaneli, 1985).
While this is certainly not the only existing perspective on organizational transformation and change (see
van de Ven & Poole, 1995), it is an established and widely adopted perspective in the existing literature.
What follows from this perspective is the assumption that the digital transformation at incumbent firms will
be to a large extent triggered and driven by factors that occur in the firm’s immediate environment, putting
these firms under pressure as they struggle to secure access to key resources they need for their survival.
We discuss some of these external factors—depicted in Figure 1 as ‘digital environment’in the following.
Figure 1. Digital Transformation from the Standpoint of an Incumbent Firm
Consumerization. The widespread adoption of digital technologies across different parts of the society has
given rise to “everyone’s IT beliefs” highlighting individualization of IT use and democratization of IT access,
ultimately producing the phenomenon of IT consumerization, defined as “the process whereby the changing
practices and expectations of consumers, shaped by the wide adoption of digital technologies in everyday
life, will influence the IT-related activities of workers and managers in organizations” (Gregory et al., 2018).
In this context consumers can be consumer-workers who leverage digital technologies to perform their work
or consumer-customers who have changing expectations regarding their interactions with the firm and the
design of products and experiences. Both consumer-workers and consumer-customers play an important
role in driving the digital transformation at incumbent firms, by demanding, co-creating, and driving digital
innovation that ultimately challenges the existing elements of the incumbent firm, including its strategy,
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structure, culture, technology platform and so forth, potentially leading to their transformation. As Vial (2019)
also finds in his literature review, changing consumer expectations and behaviors that are shaped by the
diffusion and adoption of digital technologies are important drivers for digital transformation.
Democratization. Besides changing customer expectations and behaviors rooted in the consumerization
phenomenon, incumbent firms are also confronted with a quickly changing competitive landscape as entry
barriers have been significantly reduced. This has resulted in the rise of a greater number and diversity of
startups, many of which have vast amounts of venture capital at their disposal further making access to new
technology startups easier. The pervasiveness of digital infrastructures has given rise to what has been
referred to as the networked information economy, enhancing autonomy and the practical capacity of
individuals along multiple dimensions: (1) doing more for and by themselves; (2) doing more in loose
commonality with others, without being constrained by traditional hierarchical models of organization; and
(3) doing more even within formal organizations that leverage digital technology (Benkler, 2006). Individuals
are using their newly expanded practical freedom to act and cooperate with others in a variety of different
ways, including new product development that is increasingly more distributed.
New business logics. From the perspective of an incumbent firm confronting digitalization, what adds on
top of quickly changing customers and competition is the identified limitation of relying on old business
logics, rooted in traditional product- and/or service-centered business models, for achieving future growth
and expansion into new markets. In this context, platform business models previously known from born-
digital players including Google, Apple, Facebook, Uber, Airbnb, and so forth, are providing fresh inspiration
for transformation leaders at incumbent firms to reinvent or expand their business. For example, many large
automotive manufacturers have embarked on a journey of digital transformation to turn their products into
platforms for mobility services and experiences of different kinds (Svahn et al., 2017). However, platform
businesses entail new logics that incumbent firms are just beginning to understand how to transfer and
adapt to their specific industry to make network effects and data network effects work. For example, GE has
embarked on a large-scale transformation involving the development of Predix, an industrial internet
platform, to drive disruptive change across its various business fields (Fitzgerald, 2013). Concurrently, GE
has also come to realize the limitations of rapid scaling in industrial business fields. The activation of network
effects has been limited, among other factors, by the physical constraints of industrial products. Data
network effectsa new category of network effects (see Gregory, Henfridsson, Kaganer, & Kyriakou,
2020)have also been difficult to activate as platform users and business clients of GE Predix have been
hesitant to share and give away control of their data collected from their end customers and their connected
things. Today, many consider the GE digital transformation case as a failure as the transfer and adaptation
of platform business logics to the industrial B2B setting has been only partially successful.
4 Focus of Digital Transformation
The focus of digital transformation inside incumbent firms can be viewed from different angles, including but
not limited to strategy, structure and technology. As depicted in Figure 1, digital transformation in an
organizational context can be best understood as a multi-layered phenomenon spanning organizational
strategy, structure, and technology domains (Scott Morton, 1991; Venkatraman, 1994, 2017). Digital
transformation requires organizations to face tensions of organizational learning and strike a balance across
these layers to effectively build upon and destroy old elements of technology and organization to create new
elements (March, 1991; Smith & Lewis, 2011). The way in which this balancing act plays out on a given
layer either enables or constrains the transformation on the upper and/or lower layer, highlighting the need
for a holistic and general management approach to leading digital transformation initiatives that are
oftentimes led by the CEO (Davenport & Westerman, 2018), oftentimes supported by Chief Digital Officers
(Tumbas et al., 2018).
Leading digital transformation also involves embracing new logics of digital innovation, including new forms
of organizing and new digital business models, which from the standpoint of an incumbent firm are perceived
in terms of threats and opportunities (Benkler, 2006; Nan & Tanriverdi, 2017; Svahn et al., 2017). Embracing
and transitioning towards new elements of organization and technology involves generating and leveraging
centrifugal forces, while transforming and building upon old elements requires centripetal forces. Consider
the image of gravity pulling the earth toward the sun (i.e. centripetal force) and the earth’s velocity pulling it
away from the sun (i.e. centrifugal force). In digital transformation initiatives, the earth is the large incumbent
firm, which is changing at a higher velocity than ever before as it embraces digital innovation. The velocity
of digital innovation (including the rate and direction of change) pulls the large incumbent firm outward, away
from its conceptual center (Sheremata, 2000). The sun in our image is the established technology, structure,
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and strategy within the incumbent firm, defining its past and conceptual center. Just like the force of gravity
pulling the earth toward the sun, digital transformation also involves centripetal forces (e.g., need for
integration) that push inward toward the conceptual center of the incumbent firm. In sum, it is at this meeting
point between the force of enacting future digital options and the forces of the past where digital
transformation occurs.
Furthermore, digital transformation is an organization-wide phenomenon that envelops organizational
members from across different divisions and functions. There are three areas of organizational activity in
particular that play a central role in shaping the organization’s overall digital transformation journey
business model innovation (involving changes in strategy), new product development (involving changes in
structure), and IT transformation (involving changes in technology). At the heart of the digital transformation
is a deep structure change (Silva & Hirschheim, 2007), from the hierarchy toward a more distributed and
networked form of organization, where the hierarchy may still exist but is moved to the background.
The dominant organizational system in most incumbent organizations is the hierarchy wherein organizing
is achieved through the visible hand of management, work by individual employees is constrained by
administrative procedures and formally defined work roles, and an authoritative system of order ensures
that workers’ activities are governed to be aligned with organizational goals and objectives (Chandler, 1962,
1977). In any hierarchy, a particular set of stable routines, managerial expectations, and detailed knowledge
is institutionalized, reinforced through a hierarchical structure characterized by clear departmental
boundaries, defined lines of authority, detailed reporting mechanisms, and formal procedures for
organizational decision making (Powell, 1990).
The primary concern of hierarchies is achieving economies of scale and scope in product development
(Chandler, 1990), which requires a stable product architecture and supporting knowledge. In particular,
successful new product development requires two types of knowledge: (1) component knowledge, viz.
knowledge of the core design concepts and their implementation in components, and (2) architectural
knowledge, viz. knowledge of how components are integrated and linked together into a coherent whole
(Henderson & Clark, 1990). These two types of knowledge are deeply embedded in an organization’s socio-
technical structure including knowledge systems, processes and routines, and information technologies in
use (Orlikowski, 2000).
Digital innovation involves the carrying out of new combinations of digital and physical components to
produce novel products, and transforming products through such digital innovation typically results in the
emergence of the layered modular architecture with its loose coupling between components (Yoo et al.,
2010). Thus, digital innovation represents a form of architectural innovation, which involves the
reconfiguration of core design concepts and components, and results in the need to update architectural
knowledge (Henderson & Clark, 1990). Insofar as digital innovation may also involve radical innovation that
overturns core design concepts, new component knowledge may also have to be developed (Henderson &
Clark, 1990). In either case, whether the pursuit of digital innovation within an incumbent organization or
institution destroys the usefulness of existing architectural knowledge only, or some existing component
knowledge as well, the organization is confronted with an organizational learning problem: The need to build
upon, as well as destroy, existing knowledge and supporting socio-technical structures to create the future
(March, 1991; O’Reilly & Tushman, 2008; Smith & Lewis, 2011).
The outcome of this digital transformation, if done effectively, is a newly established system of organizing
and exchange that is aligned with the layered modular architecture of the transformed product system (Yoo
et al., 2010). Studies of digital transformation in the media and entertainment industries show that wakes of
digital innovation (Boland, Lyytinen, & Youngjin, 2007) eventually lead to the emergence of loosely coupled
systems or multisided platforms (Pagani, 2013), both instances of a distributed networked organizational
form. Applied to the context of organizing for digital innovation, activities of generating value connections
on the same architectural product layer may preserve their own identity and take place in a physically and
logically separated location of the organization (e.g., creating a new set of content for a connected car’s
infotainment systems versus reconfiguring loudspeakers and smartphone connectivity of the infotainment
system on the device layer).
Loosely coupled activities also ensures that they are responsive to changes in the environment (e.g.,
replacing an infotainment system with a new generation of that technology, while preserving the bundles of
content that are streamed onto that system (Henfridsson, Nandhakumar, Scarbrough, & Panourgias, 2018)).
In sum, digital transformation within an incumbent organization pursuing digital innovation will likely involve
large-scale change away from the hierarchy and a shift toward a more distributed and networked form of
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organization. This structural change is oftentimes observed in the context of changes in the way new product
development is organized and carried out. These changes are enabled and constrained by the
transformation of the firm’s enterprise architecture, previously fully controlled internally by the IT and
business leaders, toward a more generative digital platform that allows for greater degrees of freedom and
flexibility for innovation and change (Gregory et al., 2015). Furthermore, changes at the structural and
technology layers interact with the changes at the strategy layer, where the digital transformation oftentimes
manifests itself in terms of the shift from linear value chains toward digital ecosystems that result from
platform-based business model innovation (Selander, Henfridsson, & Svahn, 2013).
5 Trajectories of Digital Transformation
The fundamental question of organizational transformation has been defined previously as “how
organizations are transformed from one system of exchange to another” (Bacharach, Bamberger, &
Sonnenstuhl, 1996, p. 479). The transformation process itself has been conceptualized as either phyletic
gradualism (a form of evolutionary system transition) or punctuated equilibrium (a form of revolutionary
system transition) (Eldredge & Gould, 1972). This evolutionary perspective is reflected in prior research on
IT-enabled organizational transformation (Besson & Rowe, 2012). According to the view of phyletic
gradualism, the process of transforming an organization proceeds along an even and slow pathway,
involves large parts of the organization, and results in repurposing of existing organizational elements (e.g.,
an evolved set of skills and resources to deal with changed environmental conditions) (Eldredge & Gould,
1972). An illustrative manifestation of this Darwinian perspective involving organizational metamorphosis in
IS literature is Orlikowski’s (1996) grounded theory of IT-based organizational transformation over time.
The punctuated equilibrium view, on the other hand, portrays the process of organizational transformation
in terms of a rapid and episodic pathway, originating in a small sub-part of the organization, and resulting in
a more radical reinvention of new organizational elements (Eldredge & Gould, 1972). This more
revolutionary perspective involving the dismantling and reestablishment of new deep structure (Gersick,
1991) is empirically manifested in Gregory et al.’s (2018) grounded theory of punctuated consumerization-
induced IT governance (i.e., deep structure) transformation involving the path-breaking transition from
functional to platform-based governance.
An open question to be discussed and debated is how digital transformation unfolds, along which alternative
pathways and trajectories. Applying the two perspectives of organizational transformation pathways, the
phenomenon of digital transformation may involve an interplay of punctuated and evolutionary change that
is internally enabled by IT but also driven by digital innovation originating in the outer environment and
develops across traditional boundaries. As an example of this interplay, innovating with consumerized digital
technology at lower organizational levels and at the organizational interface to the external environment
typically produces a form of emergent and evolutionary organizational change (Jarvenpaa & Ives, 1996).
However, this ongoing longer-term process is infused with new momentum, urgency and energy for change
through short-term bursts of punctuated change, for example the transformation of previously more
centralized IT toward a more distributed and flexible platform for digital innovation (Gregory et al., 2015).
Digital transformation is oftentimes referred to as an ongoing journey, because the type of IT-based
organizational metamorphosis described above has no ending point, is continually fueled by digital
technology change and adoption, and is periodically redirected as a result of fundamental internal changes
(e.g., new digital business strategy, top leadership change, deep structure changes) that are carried out in
response to fundamental changes in environmental conditions (e.g., legitimacy requirements in light on
break-through technology, competition, customer, and regulation changes). This view of punctuated
evolution is supported by recent empirical findings on the process of socio-technical transformation in the
context of platform-based organization (Harder Fischer & Baskerville, 2018).
6 Insights from Keynotes and Roundtable Sessions
In this section, we summarize the viewpoints of the PDW’s three keynote speakers, Ola Henfridsson,
Andrew Burton-Jones and Nicholas Berente, and discuss connections between the keynotes.
Subsequently, we highlight the key learnings of PDW roundtable participants.
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6.1 Summary of Keynotes and Common Themes
In his keynote, Ola Henfridsson focused on the evolution of research on digital innovation. According to the
Schumpeterian view, innovation is viewed in terms of recombination, a new way of combining already
existing resources. The digital innovation literature shows that with digital technology this recombination
process has become much easier. While digital innovation research focuses on the opportunities that digital
technologies afford and takes an optimistic view on the new possibilities, research on digital transformation
focuses more on the obstacles encountered when exploiting the opportunities of digital innovation.
Organizational factors may inhibit the successful implementation of digital innovation and lead to failure,
since tensions between new and old elements of technology and organization may arise.
The research stream on digital innovation started to develop with the ISR paper by Lyytinen and Yoo in
2002. The paper describes the consequences of the availability of more computing power and better storage
and provides an early perspective on the opportunities of the internet of things. With the possibility to process
machine learning algorithms on mobile devices and not only on mainframes, distribution and
democratization of digital technologies occurred. Then, the ISR paper by Yoo et al. (2010) that explored the
distinct characteristics and differences of digital innovation, laid the cornerstone for more research on digital
innovation. Innovation based on physical components is typically composed of tightly coupled components
and exhibits restricted functionality and customizability. After leaving the assembly line, function and form
are coupled. In contrast, digital innovation is layered and device and service layers are separated.
Consequently, digital innovation can be customized and take on different functions due to
These characteristics of digital innovation have far-reaching implications. Competition between firms used
to occur vertically (i.e., across layers of a product architecture) and, for instance, one car manufacturer
competed with another one. In contrast, digital innovation has led competition to occur horizontally (i.e.,
within layers of product architecture). Consequently, an information provider may compete with a traditional
newspaper with respect to a certain layer. Moreover, the blending of digital and physical components, which
may be subject to different development times, has resulted in a separation of hardware and software
development. In addition, the rise of digital innovation has created different value spaces, such as devices,
networks, services and contents.
According to Ola Henfridsson, these developments have two major implications. First, a change in the unit
of analysis from product or service to digital resource is necessary, since digital technology have offered a
variety of recombination possibilities that have led to the unboundedness of digital innovation. Second,
traditional companies have aligned themselves with their product lines. However, with the rise of digital
innovation the identification of a firm with specific product lines may be questionable as digital innovation
blurs the boundaries between different product lines as well as industry boundaries.
Next, Andrew Burton-Jones took an overarching view by reflecting on the methodological and theoretical
challenges of research on digital innovation and transformation. Especially, the constraints of empirical data
in research on digital innovation and digital transformation, such as the unstructured nature of most data,
as well as the possibility to use constraints as an advantage was an important theme in his keynote.
Moreover, Andrew Burton-Jones emphasized the importance of aligning the research goal with the research
perspective on digital innovation and digital transformation. Choosing the researcher’s embeddedness of
an emic (or insider) perspective will enable the researcher to gain an in-depth understanding of the studied
phenomenon, but also impose constraints, since the researcher is subject to bias. In his keynote, Andrew
Burton-Jones focused predominantly on the struggles he faced in conducting a large-scale empirical study
with an emic perspective. Namely, research projects on digital innovation and digital transformation struggle
to match problems of the researcher and problems of the people connected with the researched
phenomenon. Moreover, due to their dynamic and diverse nature, the research projects can struggle from
continued attempts to draw accurate insights, to negotiate access and resources, and to find theoretical
lenses that are useful and new to both theory and practice.
Andrew Burton-Jones also reflected on the current state of research on digital innovation and digital
transformation and identified a number of shortcomings. First, literature mostly considers the role of
Information Systems (IS) as problem free by not accounting for constraints that IS can impose. Second,
existing research predominantly presents successful cases of digital innovation and transformation
characterized by institutional but not IS complexity. This lack of studies on failed digital innovation and
transformation initiatives may lead to one-sided theory development. Third, rare studies that stress IS
complexity frequently identify old constraints, such as user interfaces, effective use and standardization.
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Consequently, the field of digital innovation and transformation faces the necessity of finding a balance
between old and new phenomena.
Based on these observations, Andrew Burton-Jones derived a number of recommendations for making
theoretical and methodological choices from an emic perspective. Researchers should take advantage of
the constraints of data on digital innovation and transformation, for instance, by involving the participants of
the research projects in the process of theorizing. Similarly, the choice of research methods should be
informed by the context that is studied and be relevant and meaningful to the stakeholders of the research
project. Moreover, senior scholars can shape the research on digital innovation and digital transformation
by building research ecosystems. If findings are translated to policy and action, they can have a significant
impact. Finally, Andrew Burton-Jones asks for the support of authentic research through mentoring and
editorial work.
In the third keynote, Nicholas Berente discussed digital transformation by focusing on patterns of decoupling
and organizational change. In particular, he drew on the similarities and differences of digital transformation
compared to earlier transformation processes. While we are not in the industrial age anymore, our
knowledge about organizations is rooted in that time. Thus, arguments are often based on the thinking and
conceptualization of production processes. During the IT transformation phase computers were integrated
to automate production processes and deliver the possibility to decouple integration and control. Over time,
IT integration spread across various industries as companies implemented templates laid down in ERP
systems. Consequently, companies across different industries converged based on managerial rationalism
and became isomorphic because of the IT transformation (DiMaggio & Powell, 1983). In order to achieve a
separation of integration and control on the organizational level, dynamically adjusting routines on the local
level had to take place (Berente, Lyytinen, Yoo, & King, 2016).
Nicholas Berente then described that digital transformation refers to a different type of change phenomenon.
Today, companies in different industries can be more similar to one another than companies operating in
the same industry. Digital business models, digital innovation and digital capabilities have converged across
industries leading to the blurring and dissolution of industries (Seo, 2017; Yoo et al., 2010). The difference
between IT and digital logics can be illustrated by considering the role of the chief information officer and
the chief digital officer. While the chief information officer is responsible for IT, but does not innovate, the
chief digital officer connects across different functions of the organization by enabling digital innovation
(Tumbas et al., 2018). While the locus of organizational coupling used to be the reconciliation of managerial
rationalism with historical practices, this reconciliation today occurs with digital innovation. Moreover, in
digital technology development processes we do not rely on procedural, linear substitution but on faster,
agile capabilities.
Across all three keynotes, we observe some common patterns. Especially the balance between new and
old technological and organizational elements in digital innovation and transformation was a reoccurring
theme. Frequently, constraints associated with old elements lead to tensions with the characteristics and
constraints of new elements during digital innovation and transformation. Ola Henfridsson illustrated this
fundamental tension by discussing how competition that used to occur vertically now takes place
horizontally. In addition, Nick Berente pointed out changes in industry structures and characterized the
blurring of boundaries in product line and industry structures. Further, Ola Henfridsson described that the
meaning of product and services changes from a tight coupling of form and function to multiplex and
changing functionality. Overall, extant research has focused more on studying new elements (e.g., new
ways of organizing), with relatively fewer attention paid to transformation of old elements (e.g., shifts from
physical to digital business models). In this context, Andrew Burton-Jones discussed how literature has
predominantly ignored practical complexity that is rooted in the past of organizational and IS history.
Another commonality across the keynotes we observed relates to methodological issues in research
projects on digital innovation and transformation. Andrew Burton-Jones suggested that the unpredictability
and messiness of the data is a common feature of research projects and that these characteristics could be
used to the advantage of researchers. Nick Berente then delivered examples on the manifestation of the
messiness in digital innovation and transformation research. Moreover, the manifestation of changes due
to the rise of digital technology was an important theme across the three keynotes. While Ola Henfridsson
looked at this from a bottom-up perspective focused on digital innovation, Nick Berente argued how digital
technologies lead to an increasing pace in the evolution of institutions at a higher level. Similarly, the role of
digital innovation and transformation across time was a theme connecting the different talks. All three
keynote speakers also pointed out the constraints of digital technology.
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6.2 Summary of Roundtable Sessions and Highlights
During the roundtable discussions, participants had the opportunity to discuss their research ideas and
projects with other participants and senior scholars. With respect to research on digital innovation, the
importance of the explicit reference to the digital artifact and its characteristics was a widely discussed topic
at a number of roundtables. While some participants believed that digital technology could be treated as a
“black box,” the majority believed that only a detailed description of the digital technology involved in digital
innovation and transformation could advance our understanding of the phenomena under study, in line with
calls for sociotechnical IS research (Sarker, Chatterjee, Xiao, & Elbanna, 2019). One table concluded that
only a zooming-in on the technology could lead to a more unique understanding of the changes involved in
digital innovation and transformation. These discussions were connected to Ola Henfridsson’s keynote that
had characterized the distinct characteristics of digital technology.
Another widely discussed topic was related to the terminology of digital innovation and digital transformation,
a topic outlined by Nicholas Berente in his keynote. Numerous participants struggled with the definition and
delineation of the terms “digital innovation” and “digital transformation” as well as related concepts. The
approaches chosen by different tables to address and discuss this problem varied widely. One roundtable
suggested dropping the labels to enable richer data analysis and research findings. Another table discussed
the application of the terms “digital innovation” and “digital transformation” in different contexts. Moreover,
the discussions at the roundtables showed that extant research addresses diverse phenomenon under the
umbrella term “digital transformation.” One table approached this topic by discussing what could be key
dimensions of digital transformation. Especially, the blending of physical and digital as well as old and new
elements of technology and organization characterizes digital transformation. Companies face the challenge
to decide whether to retain old elements, to get rid of them, or to translate them to the new digital context.
Another topic discussed is related to the relationship between the IT function and business functions, which
participants described to be fusing in the process of digital transformation.
Additionally, one roundtable discussion also circled around the challenges of measuring and theorizing
about digital transformation at the societal level. Since digital transformation can have an impact on multiple
levels, the participants faced challenges in choosing a research approach that enabled them to measure
the impact of the digital transformation validly and credibly. Furthermore, one roundtable reached the
conclusion that especially unintentional and disadvantageous effects of the digital transformation have
scarcely been researched, a reminder of the societal challenges surrounding digital transformations
(Majchrzak, Markus, & Wareham, 2016).
Moreover, a variety of methodological issues, which also resonated with the keynote by Andrew Burton-
Jones, were discussed in the round table sessions. Thus, the analysis of rich datasets in research on digital
innovation and transformation formed a challenge for a number of roundtable participants. One table, for
instance, emphasized the difficulty of theorizing about a complex phenomenon that evolves dynamically
over time and outlined the need for a creative data collection and analysis strategy. Another table also
emphasized that the richness of the data allows for different angles, which may result in overcomplicated
models and lead to difficulties in finding an adequate framing or scoping when reporting on the research
findings. Especially, the question of extracting unique characteristics of innovation and transformation in a
digital context compared to a non-digital context provided a challenge for numerous participants. Moreover,
the alignment of the method with the goals of the research project as well as the level of analysis and the
theory development process formed an important part of the discussions at the roundtables.
7 Avenues of Future Research
In this section, we suggest promising avenues for future research related to areas spurring discussions
during the PDW at ICIS2019 and leading to interesting and relevant questions that could be addressed by
future research.
7.1 The Struggle Between the “Old” and the “New”
Our discussion above shows that the struggle between old and new elements of technology and
organization, referred to in short from here onwards as the “Old” and the “New,” is a common theme when
studying digital transformation. Digital transformation may profoundly change, e.g., work processes, product
ranges, business models, corporate culture and identity, and industry boundaries through the adoption and
use of digital technology. It thus involves changing the “Old”, such as existing capabilities and well-
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established procedures, to enable the “New”. On the one hand, extant research focuses on the “New” and
often regards the “Old” as a constraint to be overcome. On the other hand, some of the existing assets,
such as employees’ loyalty, deep technological and market knowledge in traditionally served markets, and
certain capabilities such as managing technological change might be leveraged by the application of new
methods and digital technology. That is, rather than the “Old” being digital debt, thought to constrain the
“New”, the “Old” or parts of it might be an asset instead. Further, to employ digital technology effectively
(the New”) blending it with deep business mastery, intimate customer insights and other technologies
mastered in the past (the “Old”) seems necessary to enable that the “Old” can be complemented or even
replaced by the “New”.
This, in turn, needs the involvement of the same people who are affected by digital technology to enable
digital innovation and make digital transformation successful. Thus, the use of digital technologies (the
“New”) may lead to massive and ongoing changes to the “Old” which in turn affects the use of digital
technologies. Consequently, the interplay between the “Old” and the “New” results in paradoxes and
tensions which shapes digital innovation and transformation (Gregory et al., 2015). Considering that
“paradoxes are inherent in human beings and their social organizations” and rather than focusing on
consistency, these tensions and paradoxes provide ample possibilities to advance our understanding and
stimulate thought provoking research (Poole & Van de Ven, 1989, p. 562). The study of paradoxes, such as
those of stability versus change/flexibility, or exploitation versus exploration has a long-standing tradition in
strategy and organization studies (Schad, Lewis, Raisch, & Smith, 2016). These paradoxes are also present
when dealing with digital innovation and digital transformation. Poole and van de Ven (1989) propose
several steps researcher might undertake. One important step towards studying paradoxes in digital
innovation and transformation is to identify anomalies in the phenomenon under study and clarify what the
underlying paradox might be. As the term paradox encompasses several layers of meaning, it is necessary
to clarify what exactly the meaning is and whether some paradox can be categorized as, e.g., a logical or
social paradox. Further, researchers might tackle paradoxes in different ways such as keeping two opposing
themes separate but appreciate their contrast, situate the themes at different times, or different levels (e.g.,
micro, and macro), or locations in the social world, and finding a synthesis that eliminates the opposition.
In addition to building theory, researchers can use the theoretical concepts of paradoxes and apply well-
known theoretical lenses, such as the dynamic capabilities view, path dependence theory, and theory of
structural inertia.
Vial (2019) proposes to study how dynamic capabilities contribute to digital transformation. Indeed, the
Dynamic Capabilities View, and namely the discussion of core capabilities versus core rigidities, might be a
fruitful way to study tensions where former capabilities (“assets”) may become rigidities, that might be
termed a digital debt in our context. Dynamic capabilities denote ‘‘the firm’s ability to integrate, build external
competences to address rapidly changing environments” (Teece, Pisano, & Shuen, 1997, p. 516). While
capabilities seem a natural fit with the “New,” digital innovation and transformation, capabilities might also
become core rigidities constraining digital innovation and transformation. Leonard-Barton (1992) introduces
the idea that the core capabilities can become so rigid that they cannot respond to environmental changes.
Accordingly, capabilities that enable digital innovation and digital transformation might also turn into
constraints. Based on these considerations, there are a number of interesting avenues to study tensions
with a capabilities lens by considering, e.g., the relation between different kinds of capabilities, their
dimensions and microfoundations at the organizational and the individual level (such as managerial dynamic
capabilities) and how they evolve over time.
Insights from Path Dependence Theory might be used to study under which conditions the “Old” might
hinder or promote the “New,” or become the “New.” Path Dependence is a process that leads to the
routinized re-selection of strategic options because of positive feedback through self-reinforcing
mechanisms (Sydow, Schreyögg, & Koch, 2009; Wenzel, Wagner, & Koch, 2017). This is particularly the
case if decisions, e.g., to invest in a certain technology or skill, prove to be successful which, in turn,
increases the propensity to decide alike in the future. Consequently, past decisions constrain the present
scope of action. On the one hand, path dependence constrains the scope of action and treading new paths,
such as embracing digital innovation, becomes difficult. On the other hand, path dependence allows
exploiting the new path once entered. Developing a strategic path can turn out to be burden if flexibility and
exploitation are required. In contrast, developing a strategic path can be an asset if stability and exploitation
are required. However, digital innovation might help breaking strategic paths by destabilizing the self-
reinforcing mechanisms that led to their emergence and reproduction. Digital innovation might also play the
role of amplifying the self-reinforcing dynamics to allow reaping the benefits from digital innovation.
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The theory of structural inertia is the basis of another research stream with a long-standing tradition. Hannan
and Freeman (1984, 1993) propose that inertia develops by institutionalizing operational routines that are
designed to increase reliability (i.e., low variance of performance, e.g., regarding the quality of products)
and accountability - the ability of organizations to account rationally for their actions. Consequently, stability
and exploitation of existing competences are enhanced but simultaneously change and exploration
hindered. As both seem to be needed, extant research also strives to explain how structural inertia and
organizational capabilities jointly shape the evolution of organizations. Thus, a view of inertia and
capabilities as interdependent dynamic processes (Levinthal, 1991; March, 1991) might be a promising
avenue for further research on paradoxes in digital innovation and digital transformation.
7.2 Transcending Beyond the Boundaries of the IS Discipline
Digital innovation spans organizational, industry, and geographical boundaries. Outcomes of digital
innovation, including consumer digital technologies, directly impact and transform the society at large. This
means that research at the crossroads between digital innovation and digital transformation needs to look
beyond the boundaries of a single organization (Majchrzak et al., 2016). The model presented in Figure 1
is useful for understanding the digital transformation taking place within a single firm. However, digital
transformation is a societal-level phenomenon that spans multiple boundaries and affects individuals and
institutions, highlighting the need to expand the research agenda beyond what was the focus of (firm-level)
IT-enabled organizational transformation in the past.
Future research is needed about changes in individual-level identities, motivations, cognition, and behavior.
We also need to understand better how digital innovation impacts and transforms established institutions,
including the institution of the family, education, economic models of production, politics, and government.
Such a multi-level research program on digital transformation would inevitably have to span disciplinary
boundaries as well, drawing on and combining theoretical lenses from different areas (e.g., Henfridsson &
Yoo, 2014). For such a complex research agenda to still be relevant to the IS discipline, this research may
align with the socio-technical perspective and tradition in IS. One way to ensure the role of technology
remains in focus of IS research in this broad arena, researchers could draw on prior works on the philosophy
of technology (Olsen, Pedersen, & Hendricks, 2009) as well as the ontology or characteristics of digital
technology (Kallinikos et al., 2013). This would ensure that in studying such broad transformations that
extend far beyond the boundaries of the IT function (Majchrzak et al., 2016; Tumbas et al., 2018), where
most prior IS research has focused on, remains interesting and relevant to the quest for advancing IS theory
development and our understanding of IS phenomena.
Finally, it is important to recognize that the digital transformation has both intended and unintended
consequences, which manifests themselves differently across the different levels and within the various
institutional contexts briefly mentioned above. This highlights the need for future research on digital ethics,
or the ethical issues involves in the development and use of digital technology, products, models, and so
forth (Mingers & Walsham, 2010; Turilli & Floridi, 2009). Besides the Utilitarian perspective, which focuses
on (intended versus unintended) consequences or outcomes of actions, deontological ethics focusing on
the morality of actions themselves as well as rules or responsibilities is also highly relevant to consider in
future research on digital transformation. These more basic and universal ethical perspectives could be
complemented by business ethics including the shareholder and stakeholder perspectives, and how these
can be combined in managing digital transformation trajectories. Recently, at the World Economic Forum in
Davos, 2020, the theme of stakeholder capitalism was discussed among some of the world’s top leaders,
including CEOs of major IT companies including Microsoft, IBM, Salesforce, and many more.
In sum, expanding the established research stream on digital innovation in IS to focus on the ensued
transformation across multiple levels and institutions of society is very challenging as it transcends the
boundaries of our traditionally siloed disciplines. However, we believe that information systems scholars
have important contributions to make to this broader debate, and editors, reviewers, and other gatekeepers
should be open to interdisciplinary research in this area.
7.3 Theorizing and Choice of Methods
With the rapidly growing interest to do research on phenomena related to digital innovation and/or
transformation, we naturally also see a growing number of dissertations, and young scholars may benefit
from some guidance. In his keynote speech during the PDW, Andrew Burton-Jones already gave some
valuable methodological guidance. In addition, three recommendations can be made that follow from the
thinking conveyed in this article.
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First, similar to the need for incumbent firms to find the right balance between centrifugal and centripetal
forces of digital transformation, researchers need to find the right balance in their theorizing. It is not
uncommon for reviewers and editors these days to use the term ‘buzzword’ to criticize new theory
development that excessively introduces new language, labels, and concepts to theorize about phenomena
related to digital innovation and transformation. Reviewers and editors have a point. Doing research about
novel phenomena is no excuse for reviewing related literature, acknowledging key prior works, and adhering
to the common norms around a cumulative research tradition in IS. Having said that, editors and reviewers
also need to be open-minded about novel ideas that help move the field forward. It is the job of authors
though to convincingly make the case for reviewers and editors that new concepts and language really
needs to be introduced. Any new theory about digital innovation and/or transformation is likely to involve
some degree of recombination, similar to the way that digital innovations involve recombinant innovation,
and there is always going to be existing knowledge that has relevance in moving forward. Authors thus need
to find the right balance in their new theory construction of building upon and challenging existing knowledge
as they create new knowledge. As an example, a grounded theory study of digital transformation may
involve building upon existing concepts related to IT transformation while simultaneously introducing novel
concepts related to other aspects of a digital transformation journey that have gone unnoticed in prior IS
literature due to a focus on doing research from the perspective of the IT function as opposed to general
Second, as much as incumbent firms are increasingly embracing digital innovation, including the use of new
techniques for data collection and analysis to continuously learn and improve, researchers may leverage
these new opportunities in their research designs as well (Berente, Seidel, & Safadi, 2019; Levina, Vaast,
& Vaast, 2015). A similar discussion has been unfolding in the field of management, where researchers
have realized that they can leverage machine learning as part of their methods toolset, or, alternatively, do
research about machine learning and the broader theme of artificial intelligence including its implications for
management. Similarly, digital innovation must not only be seen as a topic of research but digital innovation
also continuously generates new opportunities for collecting as well as analyzing digital data. That said,
incorporating code, algorithm analysis, online narrative or digital archival data requires careful consideration
of existing approaches to data collection and analysis. New opportunities arise and drive new challenges.
Third, with the emergence and extensive use of digital trace data, but also the increasing focus on long-
term digital transformation initiatives, all researchers, but especially young scholars may experience a new
set of challenges. The use of trace data may be more ephemeral and dispersed for example capturing
communication in online communities, emerging digital platform functionalities, and others. Often the
procedures to archive, anonymize, structure and store are becoming challenging and demand detailed
planning and consideration. In contrast, longitudinal studies of digital transformation efforts pose questions
that require a careful design of research programs rather than projects. While for digital trace data the
negotiation of access may not be of great concern, for studies of entrepreneurial ventures that are resource
scarce or longitudinal digital transformation efforts access is a huge risk factor. With new areas of interest,
such as product development, new venture creation or digital transformation beyond the borders of IT
department, also the parties for negotiating access have changed, and commitment to such studies requires
constant reporting as well as assumes a great social network of an individual or academic institution.
We thank the editors, reviewers, PDW committee members, PDW mentors, PDW keynote speakers, and
everyone else in the AIS SIG DITE community who has supported this initiative and contributed to this
publication. This study has received funding from the Spanish Ministry of Science, Innovation and
Universities (project ECO2017-88576-R). Thank you to Verizon for supporting this work through the
Emerging Scholars professorship for Robert Wayne Gregory.
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At the Crossroads between Digital Innovation and Digital Transformation
Accepted Manuscript
About the Authors
Katharina Drechsler is a Research Associate and PhD Candidate at the German Graduate School of
Management and Law (GGS) in Heilbronn. She graduated in Information Systems from Goethe University
Frankfurt. Her research interests include digital innovation and actors in innovation management.
Robert W. Gregory serves as Associate Professor in the McIntire School of Commerce, University of
Virginia. Before that, he served as Assistant Professor of Information Systems at IESE Business School.
He received his Ph.D. from the E-Finance Lab at Johann Wolfgang Goethe University, Frankfurt, for his
research on global sourcing of business and IT services. His current research interests include digital
innovation and the transformation of large established firms.
Heinz-Theo Wagner serves as Professor of Management and Innovation at German Graduate School of
Management and Law, Heilbronn. He received his Ph.D. from the E-Finance Lab at Johann Wolfgang
Goethe University, Frankfurt, for his research on IT-business alignment. His current research interests
include the organizational aspects of digital innovation, innovation networks, and the IT business-value-
creation process.
Sanja Tumbas is an Assistant Professor of Information Systems at IESE Business School, Barcelona,
Spain. She received her Ph.D. from University of Liechtenstein at the Institute of Information Systems. Her
dissertation work has focused on digital innovation and rapid growth in entrepreneurial firms. In addition,
she has been studying digital transformation in large established firms.
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