Digital Innovation in Industrial-Age Firms: Managing the Balancing Act of Knowledge Integration

The pervasive digitalization of business environments across industrial-age industries forces incumbent firms to cope with changing competitive dynamics and business requirements. Particularly in the automotive industry, where new digital players (e.g., Uber, Lyft) and tech giants (e.g., Apple, Google) increase the complexity of the competitive landscape, embracing digital innovation becomes inevitable. Consequently, automotive original equipment manufacturers (OEMs) are increasingly exploiting digital technologies in their business activities. However, the organizational legacy (e.g., historically evolved structures, processes, and knowledge) of automotive OEMs is reaching its limits when valuable and heterogeneous knowledge required for digital innovation needs to be identified, assimilated and applied appropriately within the organizational environment. Prior research highlighted this as a significant managerial challenge and emphasized the crucial role of knowledge and its management in achieving digital innovation objectives. By employing a grounded theory approach and building upon the knowledge of 30 industry experts, I found empirically grounded evidence for three different yet intertwined mechanisms (knowledge diversification, contextualization, and application) for balancing knowledge integration. The study’s findings explain the interdependencies of these mechanisms and how their interaction contingently leads to digital innovation outcomes within the organizational environment of automotive OEMs