Business intelligence and analytics use, innovation ambidexterity, and firm performance: A dynamic capabilities perspective

•We extend the theoretical understanding of how BI&A use supports innovation ambidexterity.•Empirical findings exhibit absorptive capacity as a key mediation mechanism that enhances innovation abilities.•Increased possibilities for experimentation and predictability complement the absorptive capacity’s mediation.•BI&A yields benefits only when it is deployed to create unique complementarities with other dynamic capabilities. To survive in a dynamic and hyper-competitive business environment, firms are compelled to simultaneously introduce incremental and radical innovations. While it is recognised that business intelligence and analytics (BI&A) can support innovation and provide organisational value, the literature provides a limited understanding of its impact on balancing different innovation activities and ensuring performance gains. In this study, we examine the relationship between BI&A use, innovation ambidexterity, and firm performance by relying on the process theory of IS value creation as well as the dynamic capabilities perspective. We test our model using data collected from medium- and large-sized firms in Slovenia, applying partial least squares modelling. The results support the notion that BI&A use is positively associated with successful balancing between explorative and exploitative innovation activities, which in turn enhances firm performance. Our results also indicate that innovation ambidexterity is enhanced in two ways: indirectly through interaction with the firm’s absorptive capacity, and directly by increasing the possibilities of faster experimentation with offerings of products or services and improved predictability of the value of new products or services.