Regulatory Resilience: How Organisations Overcome Regulation‐Induced Resistance to Digital Transformation

ABSTRACT

Digital Transformation (DT) has become a strategic imperative for organisations to stay competitive. Yet, it often faces resistance. Regulation is often argued to be one source of resistance. However, regulation can also drive transformation: its role is multifaceted and especially its management in the context of DT is underexplored. Drawing on an empirical case study of an organisation undergoing large‐scale DT in a highly regulated industry, we conceptualise Regulatory Resilience as a socio‐technical organisational capability that enables organisations to dynamically respond to regulation‐induced resistance while leveraging regulatory forces for DT. Our findings reveal five distinct mechanisms through which Regulatory Resilience operates to mitigate the effects of both stable and volatile regulation and transform regulatory pressure into a capability‐building process. This study contributes to Information Systems research by challenging the view of regulation as a static, exogenous hurdle, repositioning it instead as a constitutive force that organisations actively manage through sociotechnical means. By identifying the specific mechanisms through which organisations reconcile regulatory pressures with innovation, we advance theory on the interrelated dynamics of resistance and resilience showing that Regulatory Resilience not only enables DT but is itself strengthened by DT's technological and organisational conditions, requiring organisations to deliberately cultivate it to sustain transformation.