How digital dynamic capabilities relate to breakthrough innovation: The role of ambidextrous knowledge integration under organizational inertia

In the context of accelerating digital transformation and technological turbulence, firms increasingly rely on digital dynamic capabilities (DDC) to achieve breakthrough technological innovation (BKTI). However, the mechanisms through which DDC are associated with such innovation outcomes remain insufficiently specified, particularly regarding how digitally enabled capabilities translate into knowledge processes. Drawing on dynamic capability theory and the knowledge-based view, we develop and test a theoretical framework in which ambidextrous knowledge integration, exploratory and exploitative, mediates the relationship between DDC and BKTI. Furthermore, we theorize organizational inertia as a critical boundary condition that may constrain the efficacy of this capability to innovation pathway. Using a multi-source dataset from firms across diverse industries in China, we find that DDC's primary impact on BKTI occurs through AKI, with XKI exerting a stronger mediating effect than EKI. Organizational inertia significantly weakens these effects, particularly for XKI, highlighting the contingent nature of capability-driven innovation. This study contributes to the literature in three ways. First, it clarifies how the “digital” dimension of dynamic capabilities relates to knowledge integration processes. Second, it refines the ambidexterity perspective by specifying how EKI and XKI jointly support BKTI without assuming rigid sequencing. Third, it introduces a more contingent view of capability-innovation relationships by incorporating organizational inertia. Given the China-based sample, the findings should be interpreted as contextually embedded, particularly in digitally intensive environments.