Digital Transformation Strategies and SME Performance: The Role of Innovations

Abstract

This research aims to investigate the empirical relationships between digital facilitators, digital transformation strategies, and the overall performance of SMEs. Additionally, it examines the influence of innovation on these relationships by exploring its moderating role between digital facilitators and overall SME performance, as well as between digital transformation strategies and overall SME performance. To achieve this, data was collected through a questionnaire survey targeting manufacturing SMEs in the Pakistan. The study employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to test the proposed hypotheses, and found positive relationship between digital facilitators and overall performance of SMEs which implies that digital facilitators empower SMEs to approach to the online renting services or available outsourcing. It provides the access to different digital technologies such as digital communication, digital transportation, intellectual systems and data analysists which help the firms to perform better. Secondly, the research identifies a positive relationship between digital transformation strategies and the overall performance of SMEs, indicating that such strategies contribute to streamlining business processes through the adoption of advanced technologies. Thirdly, the study reveals that innovation significantly moderates the relationships between digital facilitators and SME performance, as well as between digital transformation strategies and SME performance. This finding highlights that innovation is a key prerequisite for digitalization, as digital products continue to evolve through the integration and refinement of digital components driven by innovation.