["Journal of Management Studies, EarlyView. ", "\nAbstract\nIn this digital age, the adoption of digital technology (DT) is changing traditional business processes. Against this backdrop, we try to answer the question of whether DT could effectively bridge any interfirm knowledge capability gaps. Though effective knowledge transfer is dependent on the sender's and the receiver's knowledge capabilities, literature attributes very limited attention to their combined effects. Using signalling metaphor as the guiding framework, we forward disseminative capacity and absorptive capacity as the key capabilities of the sender and receiver, respectively, and study their combined effects on relational performance within vertical interfirm relationships. Additionally, with the belief that comprehending how DT could interplay with these capabilities holds crucial importance, we test the conjecture that DT can bridge knowledge capability gaps pertaining to the sender or the receiver. We position our hypotheses using the relational view and test them using the response surface methodology. The analysis is conducted based on a multi‐respondent dyadic survey dataset that is augmented with secondary data and longitudinal performance data. Our findings showcase that disseminative capacity and absorptive capacity are natural counterparts and that the channel effectiveness resulting from adopting DT could serve as an offsetting capability that can effectively bridge certain knowledge capability gaps.\n"]