A Conceptual Framework for Driving Digital Transformation in Japanese SMEs: Integrating Dynamic Capabilities and Service-Dominant Logic

This study examines how digital transformation (DX) unfolds in Small and Medium-sized Enterprises (SMEs) through an analytical integration of dynamic capabilities (DCs) and service-dominant logic (SDL). While DX research is abundant, existing studies tend to discuss internal organizational capabilities (DCs) and external value co-creation (SDL) in isolation, offering limited insight into how resource-constrained SMEs execute transformation in practice. Employing a multiple case study approach based on Japanese SMEs, this paper uses the micro-foundations of DC (sensing, seizing, and transforming) as an analytical lens to examine how the resource integration processes emphasized in SDL are operationalized through phased organizational decision-making. The findings illustrate that while DC provides the organizational process logic for change, SDL offers the perspective through which SMEs overcome internal resource scarcity by engaging in external collaboration. By bridging internal capability-based and external co-creation perspectives, this study contributes to a more granular and contextually grounded understanding of transformation processes under resource constraints. From a practical perspective, the findings highlight the importance of fostering dialogue and building external relationships as conditions for activating dynamic capabilities and mitigating organizational rigidity, offering practically relevant implications for SME managers and policymakers.