DIGITAL ECOSYSTEMS AND DYNAMIC CAPABILITIES TO GAIN COMPETITIVE ADVANTAGE

SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 103 DIGITAL ECOSYSTEMS AND DYNAMIC CAPABILITIES TO GAIN COMPETITIVE ADVANTAGE D.M. Rahmonova Independent PhD student at Westminster International University in Tashkent https://doi.org/10.5281/zenodo.18065426 Abstract. The purpose of this article is to explore the relationship among Dynamic capabilities (DCs) , Organisational Resilience (OR), Organisational Agility (OA) and Absorptive Capacity (AC) in the era of Digital transformation. This article will contribute to the DCs theory by exploring the role of above mentioned capabilities and how these capabilities effect to Innovativeness of the firms and competitive advantage in the long term. Although there have been major turbulences in the past such as Global Financial crisis 2008 , Demonetisation and BREXIT to name a few, there have not been parallel events like COVID-19. In COVID-19 crisis time , SMEs of all kinds including ICT firms had to face the VUCA challenges (M.Nanjia,2020). Digital transformation has been obligatory for all businesses due to COVID-19 pandemic, enterprises now must reflect on their past pandemic responses , use Absorptive capacities of their own, rely of agility in their practise for rebuilding and maintain resilience by continuously learning in the face of VUCA challenges. This article reviews, discusses and analyses academic research articles, reports, and relevant books written by the experts of Strategic Management, Innovation, and Business studies. It concludes with Results and discussion part. Keywords: digital Transformation, Dynamic capabilities, Agility , Resilience, Absorptive capacities. Introduction In today’s fast paced and globally connected world, technological opportunities, consumer needs and competitor activities are in constant change as well as difficult to predict. Due to the rise of information and communication technologies (ICTs), Digital transformations (DTs) has been important force in business world, as the ICTs demands companies to interact with customer and suppliers, in addition to collaborating with competitors. Digital ecosystems are dynamic, lightly connected networks of organisation that partners with each other to across digital platforms , encouraging innovation, fostering agility, and generating value (Volz,et.el., 2025). Firms are no longer isolated actors as they are part of larger dynamic systems that came together to generate value together. In turbulent environments, Sensing the change requires scanning, creation, learning and interpretive activity, along with investments in research and related activities. In dynamic and rapidly evolving markets, possessing valuable resources and knowledge is not enough; firms must also develop dynamic capabilities, which are the abilities to sense, seize, and transform organizational operations (Quaye & Mensah, 2018). Sensing capabilities involve identifying and understanding emerging trends, threats, and opportunities in the external environment, while seizing capabilities entail mobilizing resources and knowledge to capture those opportunities and develop new products or services (Widding, 2007). In their research paper (2024) Syamsir et.el., mentions that today's leadership requires agility, resilience and proactive decision making to keep competency amid constant disruptions. SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 104 Authors also mentioned that VUCA does not only articulate contemporary challenges, but it also gives warnings about the necessity for novel and distinctive leadership competences. As discussed by Zhang , et el. (2025) employees and leaders can perceive the crisis either as threat or opportunity, and it determines resilience outcomes as well as organisational behaviour. When crisis is perceived positively , it can activate proactive , innovative actions. On the other hand , when crisis is view as threat and looked as negative event, passive and defensive mode is activated. Literature Review. Dynamic capabilities and Competitive advantage According to Teece , 2017, Dynamic Capabilities (DC) of the firm , such as internal routines, processes and competencies that promote continuous identification, development and reconfiguration of resources to respond the constantly changing external environment. Through DCs firms will have ability to sense opportunities and threats, seize new technological and market opportunities, as well as adopt or transform its resources appropriately. Dynamic capabilities involve learning, innovation , strategic decision-making, and organizational reorganization which are fundamentally ongoing and dynamic. Author also expands the definition of DCs, If DCs are broken into smaller parts , first part can be said as capacity to sense and shape threats and opportunities. To sense the opportunities , enterprises always have to scan, search and explore markets and technologies in both "local" and "distant". Second part is about seizing opportunities, being able to detect and attain. Third part , sustaining competitiveness through reconfiguring the firm's tangible and intangible assets. These three parts are called "Orchestration" and when it is done in excellence, it can be result of successful innovation and bring long-term financial performance to the firm. To clarify the difference between first order/ ordinary and higher order capabilities (Dynamic capabilities), it is appropriate to mention Schoemaker et.el., (2018) definition from their research. According to authors, the ordinary capabilities are the ones that underpin producing and selling the main products or services existing in company's current environment. This can include efficient manufacturing, strong marketing, effective partnerships and leaderships that is capable operationally. Even though organisations are not expected to own all these ordinary capabilities, they are still required to have access to them. Authors illustrated energy sector as an example in their case, where large firms offshore their drilling services through established networks of highly specialised contractors. In this industry profits may not come from drilling obviously, but firms' ability to determine where to drill. Another function of DCs is to orchestrate how ordinary capabilities should be co-ordinated and re-orchestrated inside the firm, as well as which ones need to be added or retrenched. Simply put DCs play as link between present and future (Teece,2017). This enables the firms not to be stuck and disrupted by change. Organisational Agility as DC To stay competitive, firms are required to quickly adopt to new digital technologies, adjust their business models and reposition their business strategies. Agility in DEs relates to the enterprise's capability to readjust their organisational structures, resources and structures. And, by these actions to realise as well as capitalise on new opportunities and sense the threats at the same time (Volz et al.,2025). Real time data sharing practise, to illustrate, gives the firms ability to innovate more often because it enables them to facilitate swift responses to alterations in DEs. Leadership agility , according to Syamsir, et.el, (2004) , refers to the ability of the leaders to accept transformation quickly and effectively , make right decisions and direct the team in complex situations. Here, decision making skills , flexibility and adaptability are the crucial skills SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 105 of the leader. In VUCA environments the ability of flexibility supports leaders in making proactive decision as well as efficient resource management. Authors also mentioned the skills needed to enhance agility skills of leaders, which are emotional intelligence , improving cognitive adaptability, and supportive behaviors. Fourné et.el. (2014) discussed in their research paper that digital technologies help SMEs stay agile primarily by enhancing their ability to respond quickly and effectively to environmental changes. The capabilities related to digital technologies, such as the flexibility of IT infrastructure and the scope of technologies adopted, are crucial. These capabilities enable SMEs to integrate digital tools into their processes, fostering both incremental and disruptive changes necessary for agility. Moreover, digital technologies influence strategies and operations, allowing SMEs to adapt their business models, improve customer relationships, and streamline organizational functions efficiently,. The development of digital capabilities is thus fundamental for achieving organizational agility in VUCA environments, as it supports faster decision-making, better information flow, and more innovative responses to market turbulence,. Illustrated in Theoretical model proposed by Kaur, (2019). Source: Adopted from : Kaur, 2019 Organisational Resilience as DC According to resilience theory, its main focus lies in withstanding , adopting and recovering from shocks , disturbances or stressors , which are the capacity systems (Syamsir, et.el., 2025). These qualities elaborate the importance of robustness, flexibility and resourcefulness when faced with adversity. Organizational resilience is more about adjusting and continuing to engage in long-term plans, rather than response to a crisis (W.Ding and J.Mao, 2020). Being flexible helps the firms to respond the external turbulences faster and achieve sustainable business goals as well as being more beneficial to the environment. Originally there are two main definitions of "resilience" given by Holling (1973), the first one is the time required to return to original state after turbulent event; the second definition is the volume of disturbances that system can digest before adopting and accepting the another regime (Garti and Dolan,2021). SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 106 Resilience is mandatory skill in the time of Uncertainty for organizations to be more innovative and resistant to turbulences. At the same time resilient organizations are also creative ones. Recent crisis, COVID-19 has proved that firms are highly vulnerable and economies are sensitive to turbulences. Addition to environmental demands and public-health challenges, business challenges, such as geopolitical tensions and societal uncertainties are other pressures to organizations. Pace of change creates severe environments that are difficult to deal with for companies, therefore firms are encourages to prepare their strategic responses well in advance and plan for uncertain changes( S.Kober, 2017). Although many organizations have designed their resilience strategic responses to COVID19 crisis , for example, there are still some gap in resilience strengthening (Natale Poppensieker and Tun, 2022). The fact is, future disruptions and turbulences will be different. “Dynamic Duo”: Organisational Agility with Organisational Resilience Resilience and agility form “Dynamic Duo” because these two traits are mutually reinforcing, it is because while Resilience enables firms to endure unexpected turbulences and stay functional, Agility enables the firms to adopt and innovate respectively. This synergy gives the competitive advantage to continuous value creation even though high volatility. Resilience as complementary trait to agility, gives the ability to stand firm against disruptions, endure the shocks and maintain core operations despite uncertainty (Volz et al.,2025). Resilience and agility are also Dynamic capabilities, that evolve as organisations learn and develop new strategies. Their combinations helps firms to sense environmental changes, (resilience), seize new opportunities (agility), and resources reconfiguration. These two capabilities enable the firms to respond the ecosystem dynamics effectively and achieve long-term competitive advantage in DEs. Innovation efficiency is made more applicable when there is a good adaptability and stability which comes from resilience abilities of people in the organization (S.Korber, 2017). Being able to sustain innovation efficiency and adaptable to the changing environments require high levels of resilience from organizations. In coping and learning during uncertain times, resilience management strategies can be a key tool (Van der Vegt et al., 2015). Organizational resilience in general can make it possible to firms to develop capacity and capabilities when adapting to external uncertainties and search for opportunities in risks. In this instance research undertaken by Barret and Spencer (2021) confirmed that Resilience goes with adaptability in the organization hand in hand; firms cannot survive in such volatile environment without these two traits. Similarly, McKinsey and Company researchers wrote in 2021 article about adaptability as a key ability of the organization in times of intense systematic change as well as transformation when dealing with change. Trait of adaptability can help in dealings with uncertainty. Resilience and adaptability are linked with each other, however both have difference in essential ways; while resilience is about "bouncing back" in crisis times, adaptability is "bouncing forward"to find opportunities in challenges. Absorptive capacity as DC Absorptive capacity, as defined by Cohen and Levinthal (1990), is an organization's ability to recognize the value of new external knowledge, assimilate it, and apply it for commercial purposes. This concept emphasizes the role of learning and knowledge management in innovation and organizational growth. AC is a crucial dynamic capability in KM and Innovation processes in SMEs, it can enable firms to have access to Complementary Knowledge which can complement their own. This complementary knowledge can be fuel to drive Innovation performance. In a SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 107 dynamic market as such now, ability to absorb and apply this knowledge contributes to Innovation performance. (Benhayom,L, et.el, 2021). As “Sensing” and “Seizing” and main function of firms Dynamic Capabilities, here Absorptive capacity (AC) model is essential one; AC is both driver and component of DC in the process of sensing, seizing and reconfiguring internal and external resources which are the core capabilities of firms for strategic renewal (Volberda, Foss, & Lyles, 2009). As Cohen and Levinthal (1990) emphasizes absorptive capacity (AC) is critical factor in organisational learning and innovation, too. Authors state that AC is a crucial dynamic capability in Knowledge management (KM) and Innovation processes in organisations. It can enable firms to have access to Complementary Knowledge which can complement their own. In the case of Academia-Industry Knowledge sharing, this complementary knowledge exchange can be fuel to drive Innovation performance. In a dynamic market as such now, ability to absorb and apply this knowledge contributes to Innovation performance (Benhayom,L, et.el, 2021). Results By constantly renewing and adopting their resources according to shifts in external environment, firms can achieve long-term sustainable competitive advantage. Sustainable competitive advantage demands more than difficult to imitate resources but unique and difficultto-replicate DCs. These capabilities can be constantly used to effectively create , extend, upgrade, protect firm's asset base and keep it relevant (Teece,2017). Rapid change in technology, geopolitics, and climate change has caused leading organizations to rethink their ability to resilience and Innovation capabilities, as above mentioned , recent Covid-19 events have intensified these trends further. Organizational resilience is being taken seriously by entities to rescale their capacity to withstand turbulence and recovery strategies to emerge stronger. Such entities are investing in resilience building heavily to be innovative, relevant and succeed (J.Euchner, 2019). Managing resilience is more than new tools and ideas implemented to practice by organizations; it requires from firms to fundamentally change their mental model of business to deal with current complexity, interdependence uncertainty and systems of thinking perspective (Reeves and Whitaker, 2020). Dynamic capabilities helps SMEs to be more flexible and adaptable by helping them to identify new opportunities, reconfigure available resources and innovate according to environmental changes (M.Dejarnin, et.el , 2022). In addition to this, DCs also enable the firms to monitor and assess , if their business models are durable to external environment in which they are operating. In the case of BM is weak, if the firm has needed DCs, they can create , integrate and reconfigure both internal and external capabilities to deal with turbulent conditions, otherwise , loose their competitive advantage in the market (Schoemaker et.el., 2018). Effective governance and accurate forecasting is being impossible, due to substantial and swift transformations in today's contemporary world and as a result of challanges created by VUCA events. In essence, micro-level building focuses on individual and team learning and action, while macro-level building involves systemic and structural elements that embed these capabilities organizationally to facilitate strategic agility . Both levels are interconnected and crucial for effective development of dynamic capabilities that enable organizations to navigate VUCA environments effectively. Digitally mature firms were found to be more agile in terms of handling VUCA challenges through agility, resilience and strategic responsiveness. To be more precise, digitally mature firms are more capable in deploying and utilising the data, information and technological resources to direct their business models in response to VUCA changes (Fletcher et.el,2020). SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 108 Being agile and adoptive are the core capabilities for the firms to sustain competitiveness in such a dynamic VUCA environment. Market changes can be sensed and responded by agility of the firms through integrating the resources and seizing the opportunities. The role of integration among resilience, agility and digital ecosystems is crucial to understand how successfully firms operate and survive in digital landscape which is rapidly evolving. Due to fast pace of technological advancements, change in customer preferences and dynamic inter-firm interactions, firms have to face constant turbulences, changes. In order succeed and navigate in such business environment , firms must develop their resilience and agility capabilities (Volz et al.,2025). Findings of Hanalt et.el., (2021) confirmed that agile organisations are able to continuously innovate , monitor and adopt to customer needs and realise novel products more faster compared to others. Discussion In such a dynamic VUCA world, long term competitive advantage would be impossible, if in case ordinary capabilities alone were possessed by firms. Relying too much on ordinary capacities, can even distract the organisations from preparing to future turbulences. There are some examples to such organisations that became obsessed with ordinary capabilities and at the end of the intense competition, they had to lose their competitive advantages. First example is Henry Ford who perfected the manufacturing efficiency of Model T, however, due to changing consumer market company lost competitive advantage to General Motors which outpaced Ford both in US and International market. Second example is Nokia, which produced feature phones that was able to fit the internet to very small screens of the phones and has a rudimentary operating system. In the meantime, Apple's introduction of Iphone gave customers the experience of phone-computer , and due to Nokia was too slow in adaptation process, it lost its perch as top-selling brand. This situation was acknowledged by CEO of Nokia in 2011 as , “Our competitors aren’t taking our market share with devices; they are taking our market share with their entire ecosystem.” (Schoemaker et.el., 2018). Now, in order to earn more competitive profits , firms must be able to combine the ordinary capabilities with Dynamic capabilities , usually intangible assets (Schoemaker et.el., 2018). Dynamic capabilities gives firms advantage to sense profitable sets of competences and assets , collect and integrate process, organisational culture that is capable of being strong and change -oriented as well as assessment of business environment and technological opportunities ( Teece ,2006). Cohen and Levinthal (1990) emphasizes the importance of absorptive capacity as critical factor in organisational learning and innovation. As a result of their research, author developed framework that shows the process of acquiring, assimilating, transforming and exploiting knowledge. Absorptive capacity of the firm is very important factor in firm's innovativeness, because it determines the ability of how well the firm is able to leverage the external knowledge, such as technological developments, adaptation to market changes and being innovative to create competitive advantage over other competitors (Cohen, 1990). According to Cohen and Levinthal (1990) absorptive capacity components, namely acquisition, assimilation, transformation and exploitation are interrelated. To exploit the new knowledge, the firms must have the ability to acquire, assimilate and transform it first. The key to balancing absorptive capacity and knowledge sharing is strategic alignment which is creating mechanisms that protect vital knowledge while fostering collaboration to drive innovation. Organizations should continually assess their knowledge-sharing practices against their absorptive capacity goals to remain competitive (Cohen and Levinthal , 1990). SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 109 Lee et.al. (2015) classified Organisational agility (OA) as higher order Dynamic Capability that responds to environmental changes; innovative competitive actions are created through integration of lower-order functional capabilities into higher order DCs. OA creates competitive advantage for a firms because it is difficult to imitate DC, and OA is an option to succeed in VUCA environments (Teece et.al. 2016). Additionally, business leaders were also reminded about true value of resilience management in their organizations (S.Sharma and K.Sharma, 2020). In their research McKinsey surveyed 200 senior executives about influence of pandemic in their corporate resilience from Federation of European Risk Management Association (FERMA). While nearly 60 percent participants confirmed that they had very good resilience strategies in place, they also mentioned that pandemic proved the importance of such strategies one more time (A.Natale, T.Poppensieker and M.Thun, 2022). 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