Entrepreneurial judgment governance adaptation for digital transformation in established firms

Abstract Research Summary We contend that entrepreneurial judgment governance (EJG) is a profound yet poorly understood process in which firms sense, seize, and transform opportunities related to digital transformation. Grounded in a rich, multi‐case study of six large incumbent firms, we conceptualize and examine how firms change EJG through three phases: recognizing, distributing, and orchestrating. We find that EJG adaptation is at the heart of why some firms succeed in responding to the challenges associated with digital transformation while others fail. Implications and opportunities for future research are discussed. Managerial Summary Entrepreneurial judgment governance (EJG) is central to explaining why some firms succeed in digital transformation (DT) whereas others do not. EJG determines who has the right to exercise entrepreneurial judgment (EJ) about allocating and using resources to address new opportunities. As distinct types of uncertainties require distinct EJ features, established firms face the challenge of EJG adaptation to the unique DT uncertainties. Based on a multiple‐case study, we offer a three‐stage framework that facilitates and expedites EJG adaptation to DT. Furthermore, our study highlights that strategic leaders who fail to comprehend the need for changes in EJG, neglect to establish an EJG architecture aligned with DT goals or overlook implementing necessary adjustments internally and externally, may hinder positive DT outcomes.