Digital transformation for sustainable business performance in small and medium enterprises

Abstract

Purpose: This study examines the influence of digital transformation (DT) on the sustainable performance of Small and Medium Enterprises (SMEs) in South Africa. Digital transformation is gradually identified as a driver of competitiveness, allowing businesses to adjust to technological and market changes. Design/methodology/approach: A quantitative, cross-sectional survey was used for the study, drawing responses from a sample size of 213 SME owners and managers in the City of Matlosana Municipality, South Africa. Respondents were identified through a random sampling method. Hypothesised relationships were examined using Structural Equation Modelling with Smart-Partial Least Squares as the analytical tool. Findings/results: The results show that Digital Intensity significantly and positively influences financial, environmental, and social performance (SP), highlighting its role as a primary driver of SME sustainability. In contrast, Transformation Management Intensity shows no significant effects across these performance dimensions, suggesting that managerial effort without robust digital capabilities is insufficient to deliver measurable sustainability outcomes. Practical implications: The study contributes to Resource-Based View by demonstrating that digital resources function as critical enablers of long-term competitiveness and sustainability in SMEs. For practice, these findings underline the need for prioritising investment in digital tools and skills. Policymakers and support agencies should consider targeted initiatives, including training, funding and infrastructure support, to address barriers that constrain SME DT. Originality/value: The study offers empirical data from a developing market, integrating financial, environmental and SP into the examination of DT. It advances current debates by distinguishing between the roles of digital resources and managerial transformation efforts in shaping SME sustainability.