Digital driven success: the digitalization effect on SME performance

Small- and medium-sized enterprises (SMEs) are crucial to global economic development but face unique digitalization challenges. This study investigates how digitalization impacts SME performance using a mixed-method approach, combining archival data analysis of 61,054 U.S. SMEs and a survey of 45 SMEs. It examines the role of dynamic capabilities (opportunity sensing, seizing, and transforming) in mediating the digitalization-performance relationship. The results show technologies enhancing dynamic capabilities, like analytics, mobile, IoT, platforms, and cloud, consistently improve performance. Seizing opportunities and transforming them into strategies emerge as key to translating digitalization into gains. The archival data provide a quantitative overview, while the survey directly measures dynamic capabilities. This study makes a significant contribution to Information Technology for Development by demonstrating how targeted digitalization supports broader economic and social progress within the SME sector, which is especially important given the role of SMEs as the economic engine and source of livelihood in most developing countries.