How Digital Capability and Transformation Drive Financial Performance, Flexibility, and Quality in Small Businesses
Keywords:
Digital Capability, Digital Business Transformation, Financial Performance, Flexibility, Quality PerformanceAbstract
Digital business transformation offers significant potential for enhancing the performance of SMEs in Indonesia; however, the low digital capabilities of SME operators present a major challenge in fully capitalizing on this opportunity. The primary objective of this research is to analyze the impact of digital capabilities and digital transformation on SME performance (measured by financial performance, flexibility, and performance quality). A total of 140 questionnaires were distributed to SME operators in Solo Raya, and 116 questionnaires were used in this study. The data were analyzed using structural equation modeling. This research found that digital capabilities positively affect financial performance and flexibility, but do not impact performance quality. Digital transformation positively affects financial performance, flexibility, and performance quality. Theoretically, this study offers a new research model to explain the relationship between digital capabilities and digital business transformation on SME performance, as measured by financial performance, flexibility performance, and performance quality. Practically, this study provides valuable insights for business operators to leverage digital opportunities, drive digital business transformation, and enhance business performance.
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