The Effect of Digital Orientation and Digital Capability on Digital Transformation of SMEs during the COVID-19 Pandemic

• Published in: Journal of theoretical and applied electronic commerce research Vol. 17; no. 2; pp. 669 - 685
• Main Authors: Rupeika-Apoga, Ramona, Petrovska, Kristine, Bule, Larisa
• Format: Journal Article
• Language: English
• Published: Curicó MDPI AG 01-06-2022
• Subjects: Business models; COVID-19; digital capability; digital orientation; Digital technology; digital transformation; Digitization; Electronic commerce; Empirical analysis; Hypotheses; Longitudinal studies; mediation analysis; Orientation effects; Pandemics; Product development; resource orchestration theory; Revenue; Small & medium sized enterprises-SME; Small business; SME; Software; Transformations; Latvia
• ISSN: 0718-1876; 0718-1876
• DOI: 10.3390/jtaer17020035

Despite the growing importance of digital transformation, empirical research on the drivers of digital transformation is still lacking, creating a knowledge gap. The purpose of this study is to explore the effect of digital orientation and digital capability on digital transformation, as well as the mediating effect of digital transformation on revenues and business models of SMEs during the COVID-19 pandemic. This paper examines a new conceptual framework designed on resource-based theory perspectives by using survey data of 246 SMEs in Latvia. To achieve the research purpose, this study used a mediation analysis to examine the direct effect of digital orientation and digital capability on digital transformation, as well as to explore the mediating effect of digital transformation on SME outcomes. Our results reveal that both digital orientation and digital capability have direct positive effects on digital transformation. We also found that digital transformation has a positive mediating effect from digital orientation on revenue and business model, as well as from digital capability on revenue. These findings could be useful for policymakers, managers and practitioners to clarify how digital orientation and digital capability intermediated through digital transformation affect the outcomes of SMEs.