Vol. 5, No. 7, July 2024
E-ISSN: 2723-6692
P-ISSN: 2723-6595
http://jiss.publikasiindonesia.id/
Journal of Indonesian Social Sciences, Vol. 5, No. 7, July 2024 1609
The Role of Digital Transformation and Entrepreneurial
Orientation in Achieving Competitive Advantage in Industry 4.0
(A Study of Digital Transformation on Non-Banking Organizations in Indonesia)
Dian Alanudin
Institut Teknologi dan Bisnis Jakarta, Indonesia
Email: dian.alanudin@jbs.ac.id
Correspondence: dian.alanudin@jbs.ac.id
*
KEYWORDS
ABSTRACT
Digital Transformation;
Entrepreneurial Orientation;
Organizational Change;
Innovation Behavior;
Competitive Advantage
In the realm of transitioning economies and the advent of Industry 4.0,
digital transformation has emerged as a paramount subject. Nonetheless,
there remains a scarcity of studies offering a comprehensive elucidation of
the interplay between Digital Transformation (DT) and Entrepreneurial
Orientation (EO) in the context of Organizational Change (OC). Digital
transformation entails the integration of digital technology across all facets
of business operations, fundamentally altering how enterprises function
and deliver value to clientele. This paper explores these dynamics by
addressing three fundamental inquiries: Firstly, how do digital
transformation and entrepreneurial orientation correlate with the
Organizational Change (OC) process? Secondly, why are digital
transformation and entrepreneurial orientation deemed pivotal? Lastly,
how do digital transformation and entrepreneurial orientation impact
Organizational Change, and do they influence innovation behaviour and
competitive advantage? This paper aims to enrich the discourse and foster
an understanding of the critical roles played by digital transformation and
entrepreneurial orientation in attaining competitive advantage through
the Organizational Change (OC) process and fostering innovation
behaviour at PT Pegadaian. To bridge the existing gap in the literature, this
study posits digital transformation and entrepreneurial orientation as
antecedents of the Organizational Change (OC) process, thereby fostering
innovation behaviour and competitive advantage. The research adopts a
case study approach rooted in qualitative analysis.
Attribution-ShareAlike 4.0 International (CC BY-SA 4.0)
1. Introduction
In recent years, digital transformation, entrepreneurial orientation, and organisational change
have dominated discussions from scholars to professionals in a high-transition economy from journal
headlines to boardrooms (Meineke et al., 2019). Digital transformation integrates digital technology
into all business areas, fundamentally changing how firms operate and deliver value to customers
(Kraus et al., 2021; Vial, 2021). It is also a change in behaviour that requires organisations to
continually change and challenge the status quo and get comfortable with all the adjustment
processes. Strategic management scholars have paid detailed and full attention to organizational
change (OC) research. A summary of existing research on organizational change (OC) is described in
Table 1. Past studies in organisational change have found several factors that influence the level of
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change and mostly categorised them into two categories, which are individual and workplace factors
(group and organisational level). Holt et al. (2007) have defined four (4) elements that influence for
change, which is content, process, context, and the individual involved. Holts argue the development
and evaluation of an instrument that can be used to gauge organisational change at an individual level
Oreg & van Dam, Vakola et al. (2011) argue the antecedents that comprise pre-change antecedents
(change recipient characteristics and internal context) and change antecedents (change process,
perceived benefit/harm, and change content).
In other studies, behaviour fit predicted reactions to the change. Specifically, the degree to
which the organisation's existing values were aligned with the change vision and objectives predicted
change recipients to change (Jones et al., 2005). In another study, the degree of perceived fit between
the behaviour of two merging organizations was negatively correlated with change-related stress
(Cartwright & Cooper, 2018). Ng' ang' a Elijah (2016) argues about the adoption of a digital
transformation with top management support and commitment, organisational behaviour, level of
communication, and level of employee involvement. The literature review shows no research about
digital transformation or entrepreneurial orientation as OC antecedents. From the phenomena
background, since the new birth of digital in industry 4.0, digital transformation and entrepreneurial
orientation are two of the significant drivers to scale up productivity and overcome a highly
competitive environment. In this digital and internet era, which provides connectivity and the switch
of the concept of their own economy to a sharing economy, companies will have significant potential
to work collaboratively. Digital transformation and entrepreneurial orientation as resources should
be drivers to Organizational Change (OC) in creating innovative behavior and performance. OC is a
continuous process in building and shaping people, organizational and systems, strategy, knowledge
management, technology and IT, and collaboration, and connectivity. Organisational change starts
from a shift in corporate mindset to a first-class IT department is a priority for every company to
survive in this digital and internet era of Industry 4.0. The change increases a company's potential to
produce performance continuously. There are five research backgrounds: digital transformation in
an interconnected world, entrepreneurial orientation as resources in industry 4.0, Organizational
Change in e-Conomy SEA, innovation behaviour in highly competitive digital environments, shape a
better future with a competitive advantage will be explained in more detail below.
Toward the end of the 19th century, a new era of digital transformation was born. Until now,
the world is experiencing unprecedented change driven by the technological shifts of the Fourth
Industrial Revolution. This phenomenon will dramatically increase the reach of producers and
convenience for consumers. It will also disrupt traditional supply chains and oblige policymakers to
think differently. Such shifts are happening at an unprecedented pace across global systems. Since
September 2016, the World Economic Forum initiative “Shaping the Future of Digital Economy and
Society” has allowed public and private organizations to collaborate and realise digital technology’s
potential to benefit humankind. World Economic Forum also initiated a project called “Digital ASEAN
in 2018. This project is a part of “Shaping the Future of Digital Economy and New Value Creation” and
“Shaping the Future of Trade and Global Economic Interdependence Platforms” system initiatives.
With 125,000 new users coming onto the internet every day, ASEAN is the fastest-growing internet
market in the world. ASEAN's digital economy is projected to grow significantly, adding an estimated
$1 trillion to regional GDP over the next ten years. World Economic Forum’s “Digital ASEANinitiative
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is to work on the issues that will underpin a regional digital economy in ASEAN so that the benefits of
the Fourth Industrial Revolution can be fully unlocked and become a force for regional economic
inclusion.
Figure 1 ASEAN-6 E-Commerce Market Figure 2 Digital Initiatives by Industry
Companies should be prepared to develop and nurture the digital transformation that makes
an organisation digitally capable. Since 2016-2025, the World Economic Forum reports that
digitalisation is the key to Industry 4.0, and exponential growth or cumulative consumer value is very
high (see figure 2). The company needs to incorporate digital transformation into its future
competitiveness because, in the end, technology is just a tool. Digital transformation from people’s
minds and behaviour is crucial to scaling up productivity and exponential growth performance
through innovation behaviour.
Based on the existing Digital transformation (DT) research, organizational change (OC) and
entrepreneurial orientation (EO) studies focusing on the comprehensive explanation of its role in the
Organizational Change (OC) concept are still limited. Several theoretical and empirical research gaps
can be explored for future research. These gaps are also present in (OC) literature in general (Holt et
al., 2007); Ahmad et al., 2018). There are a number of articles study antecedents of Organizational
Change (OC) in large firms as well as SMEs (Armenakis & Harris, 2002; Cunningham et al., 2002; Iverson,
1996; Jones et al., 2005), but the issue of digital transformation and entrepreneurial orientation as OC
antecedents have not been addressed before. In addition, there is still limited research about DT on
OC within the industry 4.0 context. In order to answer these phenomena and fill the research gaps in
section 1.3, this study raises a research question “How is the role of digital transformation and
entrepreneurial orientation associated with the Organizational Change (OC) process, and whether it
has any influence on innovation behaviour and competitive advantage and firm performance?”
Digital transformation is a critical issue in Industry 4.0 that every company should catch up with and
Source: https://reports.weforum.org/
Source: world Economic Forum
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have a ready-to-cope attitude. The novelty of this study is to answer the research question to fill the
problem of the phenomenon and, additionally, will fill the gap on DT as the antecedent and driver for
OC. The role of digital transformation and entrepreneurial orientation of the OC process in PT
Pegadaian will impact innovation behaviour and competitive advantage. We propose the growing
concept in digital transformation and entrepreneurial orientation as the mechanism to fill the
research gaps mentioned in this chapter. Therefore, by using resource-based theory, this study aims
to contribute to the role of digital transformation and entrepreneurial orientation in the ROC process
as organisational (managerial) and resources within the branches of PT Pegadaian as unit analysis.
Besides filling the gap in OC research, the relationship between the OC process and innovation
behaviour can also fill the gaps in OC literature about innovation performance in the industry 4.0
context, which is still limited.
In summary, this study aims to contribute to strategic management by investigating the role of
digital transformation and entrepreneurial orientation that leads to OC process activities and its
consequences to facing industry 4.0, innovation behaviour, and competitive advantage. Furthermore,
this study also sheds light on implementing OC practice as integrated studies in four elements. Ahmad
M. H. et al. said, “Most researchers are focusing only on an item as their independent variable. The
lack of integrated studies resulted in a poor understanding of the critical and crucial factors among
the four elements. This study also implements the analysis of the organisation level, not only on an
individual level. The studies investigate more on the group and organisational level to provide
findings that can be generalised across types of change content. The data collection in this study
examines companies with multiple branches. These efforts are trying to respond to Mohd Hafis
Ahmad et al. (2018) research recommendation.
2. Materials and Methods
This research aims to examine digital transformation and entrepreneurial orientation as the
antecedents of the organisational change process that creates innovation behaviour and competitive
advantage. Thus, in this section, the researcher describes the research methodologies to conduct the
study.
The Case Study Approach
In this study, the researcher uses the case study approach based on a qualitative study with
primary data collection from the unit analysis in the section. The theoretical gaps are identified in the
literature review phase. Some data and information are also collected from secondary data, such as
media and firm websites. The case study approach in this study is developed by using the
measurement items from the previous study. The case study approach is the best option for digital
transformation topics that have very limited literature and are new phenomena in this industry 4.0.
The researcher will conduct the interviews to make them relevant to the research context about
digital transformation and entrepreneurial orientation as OC drivers.
Case Selection
This study investigates a single case study in PT Pegadaian. PT Pegadaian has all the criteria
and experience to give a holistic understanding of answering all of the research questions in this
study. The second reason, PT Pegadaian has the highest market share in Indonesia as an original
researcher country. Third, PT Pegadaian has the highest market share, which qualifies as this study
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will examine competitive advantage from a market share point of view. The researcher will conduct
an interview with a leader from PT Pegadaian to examine and have the inside whether the digital
transformation, as well as all the questions that happened in the respondent firm and also examine
the case study that will be conducted are well understood.
Data Collection
The data collection will be conducted via pilot interviews and case studies, as described below.
1. Pilot Interviews; As the initial step of the study, the researcher will conduct an interview with a
leader from PT Pegadaian to examine whether the developed variable, as well as the indicators,
is happening in the respondent firm. The second reason is that this pilot interview is to get insight
and an understanding of how digital transformation, change, and innovation happen.
Furthermore, matches with our case study are well understood.
2. The Case Study Approach; the case study approach in this study uses digital transformation as
an empirical phenomenon. The phenomenon of digital transformation will derive organisational
change, and innovation behaviour needs to be investigated through case studies, with very
limited theory available. A case study is the investigation of a contemporary, empirical
phenomenon and its real-life context when the boundaries between the phenomenon and its
context are not clearly evident and when multiple sources of evidence are used Yin, (1991)
(Masud, 2018). In this study, digital transformation is the phenomenon to be studied and needs
further investigation.
3. Unit of Analysis; In order to examine the digital transformation and entrepreneurial orientation
as organisational change antecedents, we approach the entire management teams of the PT
Pegadaian and Branch Head from a highly competitive and turbulent branch to be involved in
this digital transformation. Mostly, branches from the capital of the Indonesian provinces as unit
analysis for this study. There are two types of PT Pegadaian branches. In this study, the sample
will use the branches of PT Pegadaian syariah and conventional type with highly competitive
market conditions.
Method and Data Analysis
To have a clear insight and comprehensive understanding of data analysis. These are the five
steps and activities that will be taken to analyse the data. First, after the interview and gathering
information phase is conducted, the reports will be analysed. All interview reports will be carefully
read and re-read. After all of that process, the data will be organised into meaningful fragments.
Second, to indicate the meaning, the data will be classified using the fragments, and these fragments
will be coded-labeled in sentences to indicate the meaning. The third step is grouping several
fragments according to the code. Five, the last process, after we coded a case, the subcategories from
a category will be tested. “Do they discriminate between the cases, give an overview over time,
combine several quotes?” Miles and Huberman, (1994); Stauss and Corbin, (1990) in (Deterding &
Waters, 2021). In this phase, a case description is made. The complete case description will be sent to
the person who is in charge of digital transformation in PT Pegadaian. The feedback will supply
additional information to wipe out any mistakes, and the confidential information should be omitted
from the report.
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3. Results and Discussions
The manuscript addresses the critical interplay between Digital Transformation (DT),
Entrepreneurial Orientation (EO), and Organizational Change (OC) within the context of Industry 4.0.
By adopting a qualitative case study approach focused on PT Pegadaian, the research aims to
comprehensively understand how DT and EO correlate with the OC process and their impact on
innovation behaviour and competitive advantage. Firstly, the study explores the correlation between
DT, EO, and OC processes. Digital transformation, characterised by integrating digital technology into
business operations, and entrepreneurial orientation, exemplified by a proactive and innovative
mindset, are identified as antecedents of OC. The manuscript highlights the importance of leadership,
employee engagement, and change management in facilitating successful OC in the context of DT and
EO.
Secondly, the research elucidates why DT and EO are deemed pivotal. In the transitioning
economies of Industry 4.0, DT and EO play crucial roles in driving organisational change, fostering
innovation behaviour, and gaining competitive advantage. The manuscript underscores the
significance of embracing digitalisation and entrepreneurial practices to navigate the challenges and
opportunities of Industry 4.0 effectively. Lastly, the study examines how DT and EO impact OC,
innovation behaviour, and competitive advantage. Through qualitative analysis, the research
identifies the mechanisms through which DT and EO influence OC activities, innovation behaviour,
and, ultimately, competitive advantage. By leveraging DT and EO, companies can enhance
productivity, engagement, and innovation capabilities, thereby gaining a competitive edge in the
digital era.
4. Conclusion
In conclusion, the manuscript enriches the discourse on the critical roles played by DT and EO
in attaining competitive advantage through the OC process and fostering innovation behaviour. By
addressing the research questions, the study contributes to a deeper understanding of the complex
dynamics between DT, EO, and OC in the context of Industry 4.0. Moving forward, it is imperative for
companies, including PT Pegadaian, to recognise the pivotal importance of DT and EO in driving
organisational change and achieving competitive advantage. By embracing digital transformation and
cultivating an entrepreneurial mindset, companies can adapt to the evolving landscape of Industry
4.0 and capitalise on new opportunities. The research underscores the need for continuous
adaptation and innovation to remain competitive in the digital era. By leveraging DT and EO as
antecedents of OC, companies can foster a culture of innovation, drive organisational change, and
ultimately enhance their competitive position in the marketplace.
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