Digital transformation strategies, dynamic capabilities, and innovation performance: Evidence from the Chinese banking industry

Abstract

In the era of rapid digital transformation, commercial banks must leverage emerging technologies to sustain innovation advantages. This study examines the effect of digital transformation strategies (DTS) on innovation performance (IP) in Chinese commercial banks, emphasizing the mediating role of dynamic capabilities (sensing, seizing, reconfiguration) and the moderating effect of information technology infrastructure (ITI). Grounded in the Resource-Based View (RBV), survey data were collected from 514 middle- and senior-level managers across multiple banking divisions. The baseline model shows that DTS has a significant positive effect on IP (β = 0.487, p < 0.01), explaining R² = 0.286 (Adjusted R² = 0.285). Incorporating ITI further strengthens IP (β = 0.070, p < 0.05), increasing explanatory power to R² = 0.293. The interaction term (DTS × ITI) is significant and positive (β = 0.188, p < 0.01), raising overall explanatory power to R² = 0.335 (Adjusted R² = 0.331), thereby confirming the moderating role of ITI in amplifying the DTS–IP relationship. Dynamic capabilities serve as key pathways linking strategic digital initiatives to innovation outcomes. These findings demonstrate that digital transformation strategies substantially enhance innovation performance, particularly when supported by strong dynamic capabilities and robust IT infrastructure. Managerially, the results highlight the need for banks to pursue simultaneous investments in digital strategy, capability development, and IT infrastructure to achieve superior innovation outcomes in the digital era.