Digital Transformation and Competitive Advantage in Regional Banking: Relational Conversion and Contextual Constraints in an Emerging Market

Abstract

This study examines how digital transformation capabilities translate into competitive advantage at branch level within a semi-urban emerging-market banking context. Drawing on the Resource-Based View, Dynamic Capabilities theory, the Technology–Organization–Environment framework, and Relationship Marketing theory, the study develops and tests a relational conversion model in which digital capabilities influence competitive advantage both directly and indirectly through customer relationship strength. Using survey data from 147 customers and branch-level inputs, regression and bootstrapped mediation analyses reveal that digital network capability and digital skills significantly enhance competitive advantage, while digital marketing exhibits a smaller but positive effect. Customer relationship strength emerges as the strongest predictor and partially mediates the digital capability–advantage relationship. The findings demonstrate that in infrastructurally constrained environments, digital resources do not automatically generate performance benefits. Instead, competitive advantage emerges when digital capability is embedded in relational trust and organizational integration. The study refines resource-based logic by identifying relational conversion as a boundary condition shaping digital capability effectiveness in emerging markets.