ABSTRACT The critical role of small and medium‐sized enterprises (SMEs) in driving economic growth through employment generation and innovation cannot go unseen, especially the efforts of small firms in promoting sustainable entrepreneurship. With more market and consumer focus on sustainability and the shift toward eco‐friendly products, SMEs can successfully navigate these changes through digital transformation (DT). Therefore, this study systematically reviews how DT enables SMEs to achieve sustainable entrepreneurship through resource optimization. Grounded in dynamic capability theory (DCT), the review investigates how DT tools and techniques influence SMEs' capability building processes. Technologies such as artificial intelligence, the Internet of things, blockchain technology, big data analytics, and cloud computing reshape how SMEs sense opportunities, seize digital solutions, and reconfigure their resources to pursue sustainability objectives. Using two leading databases, the study synthesizes 80 peer‐reviewed articles published between 2010 and 2025. The findings reveal that DT enhances five key resource domains: organizational, human, financial, technological, and social by transforming them into dynamic capabilities (DCs) that drive environmental, social, and economic sustainability. Building on these insights, the paper introduces the Resource‐Centered Transformation Path (RCTP) framework. A framework conceptualizes how DT enables SMEs to optimize static resources into adaptive and sustainability‐oriented capabilities. The framework extends DCT by integrating digitalization mechanisms within its foundations and by identifying digital technologies as key enablers of resource optimization, leading to transformative sustainable outcomes. Overall, the study contributes to advancing theoretical and practical understanding of how DT empowers SMEs to evolve from resource‐constrained enterprises into sustainability‐driven organizations.
Nasser Hadi Alajmi (2026) studied this question.