The crucial role of digital business transformation for MSME success in Lao PDR: The mediator between business adaptation strategies and MSME performance.

This study investigates the critical role of digital business transformation (DBT) on MSME success as a mediating factor between business adaptation strategies (BAS) and MSMEs performance of micro, small, and medium enterprises (MSMEs) in Lao PDR, focusing specifically on Pakse City, Champasak Province. We conducted a quantitative research study, collecting primary data from a sample of 400 micro-enterprises using a structured questionnaire. The motivation for this research stems from the understanding that while digital transformation can significantly improve operational efficiency, market access, and profitability for MSMEs, these businesses in Laos frequently face substantial challenges, including limited capital, technological knowledge, and digital skills. The questionnaire was developed by adapting existing validated scales from a comprehensive literature review. We used IBM SPSS and Amos v23 software for data analysis, which was conducted in three phases: first, we assessed the measurement model to ensure the reliability and validity of the scales; second, we analyzed the structural model to test the hypothesized relationships; and third, we performed a mediation analysis to determine the effect of DBT. Our findings indicate that DBT significantly mediates the relationship between business adaptation strategies and MSME performance. This suggests that simply adopting adaptation strategies is not enough; the effective implementation of DBT is essential for realizing a positive impact on performance. The study contributes to the literature by providing a nuanced understanding of the mechanisms through which DBT drives MSME success in a developing country context. The practical implications of this research are substantial, providing valuable guidance for policymakers, business development organizations, and MSME owners to formulate effective strategies for fostering digital transformation and sustainable growth in the Lao PDR.