A Sustainable Digital Transformation Capability Framework for SMEs

Thesis Abstract

This study investigates how small and medium-sized enterprises (SMEs) construct and sustain digital transformation capabilities to achieve enduring competitive advantage in dynamic market environments, addressing the gap between rapid digital adoption and long-term capability development. The problem stems from SMEs often adopting technology initiatives in a piecemeal fashion without a coherent, sustainable framework that aligns technological, organizational, and environmental factors, resulting in suboptimal performance and limited resilience. The aim is to develop and validate a Sustainable Digital Transformation Capability Framework (SDTCF) for SMEs that integrates technology stewardship, process reengineering, organizational learning, and sustainability considerations to enhance long-term value creation. Specific objectives are (1) to identify core digital transformation capabilities that contribute to sustainability-oriented performance in SMEs; (2) to theorize a multidimensional framework linking technology, processes, people, and environment to durable competitive advantage; (3) to assess the mediating role of organizational learning and absorptive capacity in translating digital initiatives into sustained performance; (4) to evaluate the influence of leadership, governance, and external ecosystem factors on the development and maintenance of SDTCs; and (5) to provide actionable guidelines for SMEs to implement and monitor sustainable digital transformation efforts. A mixed-methods research design is employed, combining a cross-sectional survey and multiple case studies to achieve both breadth and depth. The population comprises SMEs across manufacturing, retail, and services sectors in a metropolitan region with prior digital investments. A stratified random sample of 420 SMEs will be surveyed, ensuring representation by sector, size, and digital maturity level; 6 in-depth case studies will be conducted in purposively selected SMEs that exhibit varying degrees of digital maturity and sustainability performance. Data collection will utilize a structured questionnaire measuring digital transformation capabilities, organizational learning, absorptive capacity, leadership and governance practices, sustainability outcomes, and firm performance, with validated scales adapted from prior studies and supplemented by context-specific items. Additionally, 24 semi-structured interviews will be conducted with CEOs, CIOs, operations managers, and digital champions, complemented by archival data (annual reports, sustainability disclosures, and digital strategy documents). Validity and reliability will be established through pilot testing, confirmatory factor analysis (CFA), and Cronbach’s alpha assessments. Quantitative data will be analyzed using structural equation modeling (SEM) to test the proposed SDTCF and relationships among constructs, with multi-group analyses by sector and size. Regression analysis and mediation/moderation tests will examine indirect effects via absorptive capacity and organizational learning. Qualitative interview data will be analyzed using thematic analysis to identify patterns around capability development, governance challenges, and sustainability integration, with triangulation against survey results. Case study narratives will be synthesized using cross-case analysis to illuminate contextual dynamics and boundary conditions of the SDTCF. Expected findings include (a) identification of a core set of digital transformation capabilities that robustly predict sustainable performance; (b) validation of a higher-order SDTCF encompassing technology orientation, process agility, human capital development, and environmental stewardship; (c) evidence that organizational learning and absorptive capacity mediate the link between digital capabilities and sustained outcomes; (d) elucidation of leadership, governance, and ecosystem factors that strengthen or hinder sustainable digital transformation in SMEs; and (e) sector-specific nuances that influence the prioritization and sequencing of capability development. The study contributes to knowledge by integrating digital transformation and sustainability literatures to articulate a theory-driven, practically applicable framework for SMEs. It advances understanding of how durable digital capabilities are built, maintained, and aligned with environmental and social objectives, while offering a measurable model to guide SME strategy, investment, and governance. The implications for policy include informing SME support programs, digital finance schemes, and governance standards that incentivize sustainable digital investments. Practical recommendations encompass a roadmap for capability development, performance dashboards, and monitoring mechanisms to sustain digital transformation benefits over time. The main conclusion is that sustaining digital transformation in SMEs requires an integrated capability framework that harmonizes technology, process, and human capital with sustainability imperatives, supported by robust leadership and continuous learning; recommended actions include establishing a digital governance office, investing in ongoing digital literacy, embedding sustainability KPIs in digital roadmaps, and fostering external partnerships within digital ecosystems.