Article
Digital Transformation Capability and Business Reliance in Small and Medium Enterprises
Purpose: Small and Medium Enterprises (SMEs) are essential to the Indian economy, accounting for nearly 30% of the GDP and over 45% of total exports. However, they face significant risks from demand fluctuations, supply chain interruptions, and technological changes. This research investigates whether Digital Transformation Capability (DTC), defined as a second-order construct that includes Digital Technology Capability, Digital Leadership Capability, and Digital Culture & Talent Capability, improves Business Resilience (BR) in Indian SMEs and whether this effect is mediated by Organizational Agility (OA).
Design: A cross-sectional survey involving 385 owner-managers or senior managers from registered Udyam SMEs across manufacturing, trading, and services sectors was conducted. The data was analyzed using Partial Least Squares Structural Equation Modelling (PLS-SEM), adhering to reflective-formative higher-order modeling guidelines.
Findings: The measurement model indicated adequate reliability along with convergent and discriminant validity. All proposed direct relationships were statistically significant, with Organizational Agility partially mediating the relationship between DTC and Resilience; it accounted for 61.4% of the variance in Business Resilience.
Originality: This study expands dynamic capability theory within the context of Indian SMEs and presents one of the first empirically validated mediation models that connect digital transformation capability with agility and resilience in an emerging market SME environment. The implications for MSME policy and guidance for owner-managers are discussed.