Unveiling knowledge practices and microfoundations of knowledge-based dynamic capabilities for digital transformation in SMEs through industry–university perspective

Purpose This study aims to investigate how knowledge practices adopted within the industry–university collaboration can enhance the development of knowledge-based dynamic capabilities (KBDCs) to foster digital transformation (DT) in small- and medium-sized enterprises (SMEs). Design/methodology/approach This study adopts a comparative case study methodology, including ethnography, semistructured interviews, direct observations and documental information collection. The research is focused on eight Italian SMEs participating in three editions, from 2021 to 2023, of the “LUM Open Challenge by Enterprise” initiative led by LUM University Giuseppe Degennaro and the Italian Association of Young Entrepreneurs of Confindustria Bari-BAT. Findings The results offer insights into how SMEs can strengthen the microfoundations of KBDCs for DT through knowledge practices developed in the open innovation (OI) processes occurring between University and Industry. Specifically, the authors found that interactions aiming to embrace OI strategies between University and Industry involve valuable knowledge practices such as inspiration, research and ideation and development and evaluation, able to develop KBDCs for DT categorized in three macro categories: digital sensing capabilities, digital seizing capabilities and digital reconfiguring capabilities. This arrangement gives SMEs the necessary capabilities to initiate a DT journey. Practical implications This study provides guidelines for SMEs to develop KBDCs for DT. It recommends knowledge practices and OI processes, leveraging young students’ creativity and partnering with local SMEs and institutions. Originality/value This study explores the integration of dynamic capability theory with the theory of Industry–University collaboration, aiming to expand research horizons.