The impact of digital transformation and operational management on the financial performance of MSMEs in India

The study investigates the impact of operational management and digital technology transformation on the financial performance of Micro, Small, and Medium Enterprises (MSMEs) in western India. This research examines the combined impact of these factors on the financial and operational outcomes of MSMEs, offering insights for business owners and policymakers. The study is based on empirical analysis of responses from 140 business owners and managers of MSMEs across industrial clusters in western India, using structured Likert scale questionnaires to assess relationships between operational management, technology transformation, and financial performance through Partial Least Squares Structural Equation Modeling (PLS-SEM) analysis. Findings indicate that both constructs positively influence financial performance, with technology transformation showing a comparatively stronger effect. Businesses leveraging both effective operational strategies and digital tools experience higher profitability, return on assets, and return on investment. The study further reveals significant differences in operational and technological capabilities across firm size categories, with medium-sized enterprises outperforming micro and small enterprises. The geographical scope is limited to select industrial clusters in western India, and findings may not be generalizable across India given regional variation. The study emphasizes that MSMEs must integrate operational excellence with digital innovation to remain competitive in an evolving market.