Purpose This study examines the role of digital transformation in fostering innovation, market expansion capabilities and organizational growth among SMEs in Uganda and Tanzania. Grounded in dynamic capabilities theory, the research explores how SMEs leverage digital transformation to enhance capabilities and navigate technological turbulence. Design/methodology/approach Using a structured questionnaire, responses were obtained from 634 SME owners, senior managers and IT/digital strategy executives in Uganda and Tanzania via online and face-to-face surveys over three months. The study employed the New PROCESS model in SmartPLS v.4 to analyze hypothesized relationships. Findings The results indicate that digital transformation positively influences innovation capabilities, market expansion and organizational growth. Additionally, innovation and market expansion partially mediate the digital transformation-growth relationship. However, technological turbulence weakens the indirect effects of digital transformation, suggesting that firms in volatile environments face greater challenges in leveraging digital initiatives for growth. Research limitations/implications The study focuses on SMEs in Uganda and Tanzania, limiting generalizability to other African markets. Future research could examine longitudinal effects and sector-specific digital transformation dynamics. Practical implications SMEs should strategically align digital transformation with innovation and market expansion efforts, while policymakers must support digital adoption through training programs, infrastructure development and regulatory stability. Originality/value This study expands DCT by contextualizing digital transformation within African SMEs, demonstrating how firms in resource-constrained environments develop and deploy dynamic capabilities to achieve sustainable growth.
Kobusingye et al. (Tue,) studied this question.