This study investigates how digital platforms can drive the digital transformation of participant firms in their surrounding business ecosystems. To do so, we conduct an in-depth case study of Alibaba’ cross-border e-commerce platform and eleven seller firms operating on the platform. Our results highlight the importance of proper empowerment in platform-driven digital transformation. In particular, we observe that Alibaba attempts to facilitate the digital transformation of seller firms through three types of activities: resource empowerment, psychological empowerment, and structural empowerment. Moreover, we find that the sequence of these empowerment activities plays a critical role. Without being psychologically empowered first, seller firms react quite passively to Alibaba’s resource provision and structural support. Psychological empowerment provides the activation triggers for the sellers to renew their mindsets and become receptive to Alibaba’s support and guidance, which ultimately contribute to the digital transformation of their businesses.
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