Psychological capital and digital readiness among manufacturing SME employees in Malaysia: the mediating role of work engagement and the moderating role of perceived organizational support

Abstract

The rapid advancement of digital technologies has accelerated digital transformation across industries, requiring organizations to develop employees who are psychologically prepared to embrace digital change. Although previous studies have extensively examined technological capabilities and organizational resources, limited attention has been given to the psychological factors that facilitate employees' digital readiness, particularly within small and medium-sized enterprises (SMEs). Drawing upon the Job Demands–Resources (JD-R) model, and the Technology Acceptance Model (TAM), this study investigates the influence of Psychological Capital (PsyCap) on employees' digital readiness through the mediating role of work engagement and the moderating role of Perceived Organizational Support (POS). A quantitative cross-sectional survey was conducted among employees working in Malaysian manufacturing SMEs. Data were analyzed using Partial Least Squares Structural Equation Modelling (PLS-SEM). The findings demonstrate that PsyCap significantly enhances employees' digital readiness both directly and indirectly through work engagement. However, POS does not show any effects on the relationship between PsyCap and digital readiness, indicating that SMEs employees’ internal psychological resources are sufficient to drive digital readiness regardless of the degree of organizational support. This study contributes to the growing literature on employee digital readiness by integrating psychological, motivational, and organizational perspectives into a unified framework. The findings extend existing digital transformation research beyond technological capabilities by highlighting the critical role of employees' positive psychological resources and supportive organizational environments in facilitating successful digital adaptation. Practical implications are provided for SME managers and policymakers seeking to enhance workforce readiness in the era of digital transformation and artificial intelligence.