Abstract Digital transformation is a complex, multi‐level phenomenon that still challenges research and practice. Recent research has highlighted the influence of digital ecosystems on digital transformation, but we lack knowledge about how this relationship unfolds across the organisational and the ecosystem levels. Following a phenomenon‐based theorising approach and applying a digital resource‐based view, we present the OCO (orientation, cooperation, orchestration) theory of digital transformation. The OCO theory explains the relationship between an organisation's digital transformation and its integration into a digital ecosystem. We uncover and explain three interdependent mechanisms, that is, orientation, cooperation, and orchestration, that are set in motion by cross‐level interactions between the organisational and the ecosystem levels and that centre around digital resources. Our work advances the frontier of multi‐level digital transformation research explaining the influence of a digital ecosystem on digital transformation. We conclude through six propositions that the deeper its digital ecosystem integration, the more likely an organisation's digital transformation is effective. Therewith, we aim at mobilising future digital transformation research to bridge the organisational and the ecosystem levels and provide four future research themes. Our work also encourages practitioners to acknowledge and manage the influence of digital ecosystems on digital transformation.
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