Organizational capabilities for digital innovation: a systematic literature review

Purpose The rapid advancement of digital technologies compels companies across all industries to develop new capabilities to foster innovation and sustain competitiveness. Consequently, scholarly debates have intensified regarding how these new capabilities contribute to companies’ innovation endeavors. This study addresses this imperative by exploring two primary research questions: first, identifying the essential organizational capabilities for digital innovation; and second, examining how these capabilities facilitate innovation. The objective is to develop a comprehensive conceptual framework that classifies digital innovation capability as a higher-order organizational capacity, offering valuable insights for both academic scholarship and practical applications in digital innovation management. Design/methodology/approach Using a qualitative approach, this study combines a systematic literature review with grounded theory principles to analyze 38 empirical papers from Scopus and Web of Science databases. The rigorous multi-stage coding process – open, axial and selective coding – facilitated the identification and synthesis of valuable insights for digital innovation capabilities. This approach ensures a comprehensive yet focused review, supporting the development of a robust theoretical framework. Findings Four critical capability clusters were identified to shape digital innovation capabilities: sensing, analytic-driven, digital platform and orchestration. Sensing capabilities enhance environmental awareness and enable organizations to detect market needs and opportunities, fostering customer-centric innovations. Analytic-driven capabilities leverage data for insightful decision-making and trend analysis. Digital platform capabilities highlight the strategic use of technological infrastructures to enable collaborative innovation, integrating diverse capabilities and objectives. Orchestration capabilities focus on effective coordination of resources and partnerships, ensuring sustained digital innovation by bridging capability gaps and reconfiguring resources. Collectively, these clusters offer a holistic framework for excelling in the dynamic digital innovation landscape. Originality/value While previous literature has focused on the impact of individual capabilities on digital innovation, this study offers a novel and integrative framework that categorizes digital innovation capabilities into four distinct yet interconnected clusters: sensing, analytic-driven, digital platforms and orchestration. This framework delineates the unique roles each capability plays in the digital innovation process. By synthesizing empirical studies and constructing a robust theoretical framework, this research significantly contributes to both academic scholarship and practical applications, offering essential strategies for organizations to enhance their digital innovation efforts through sustainable capability development.