In light of the booming digital transformation of firms, we study how industry digital fashion in acompetitive environment shapes the development of firm digital skills and their subsequent impacts on firm financial performance. We take an emerging divergence lens in recent literature and argue that firms deviate from their industry digital fashion to gain competitive advantage by developing unique firm digital skills. By using a unique panel dataset from 172 firms between 2010 and 2019, we find that the industry digital fashion has a negative association with firm digital skills and that firm digital skills are subsequently positively associated with firm financial performance. Our findings contribute novel insights into firms' divergence from industry norms to derive competitive advantage from firm digital skills, as well as the critical role of industry competitive environment in the digital transformation of firms. Read more here.