Digital Capability, Innovation Capability, and Entrepreneurial Orientation Shaping Business Performance of MSMEs in Emerging Economies

Abstract

This study examines how digital capability, innovation capability, and entrepreneurial orientation jointly shape the business performance of Micro, Small, and Medium Enterprises (MSMEs) in emerging economies. Grounded in the Resource-Based View (RBV), Dynamic Capabilities Theory (DCT), and the Technology–Organization–Environment (TOE) framework, the study adopts a qualitative approach using a Systematic Literature Review (SLR). A total of 35 peer-reviewed articles published between 2020 and 2025 were systematically selected from Scopus, Web of Science, and Google Scholar and analysed using thematic analysis. The findings indicate that digital capability provides the foundation for business performance but generates greater value when mediated by innovation capability and reinforced by entrepreneurial orientation. Innovation capability transforms digital resources into value-creating innovations, while entrepreneurial orientation strengthens organizational adaptability and opportunity recognition in dynamic business environments. The review also identifies contextual barriers, including resource limitations, digital competency gaps, and institutional constraints, which influence digital transformation outcomes in emerging economies. Overall, the study concludes that sustainable MSME performance depends on the strategic integration of organizational capabilities rather than technology adoption alone