UNLOCKING SME COMPETITIVENESS THROUGH DIGITAL TRANSFORMATION AND STRATEGIC AGILITY: A PAKISTANI PERSPECTIVE

Abstract

Digital transformation (DT) has become one of the most important competitive advantages of small and medium-sized enterprises (SMEs), although the effects of transformations on firm performance still depend on organizational performance in terms of strategic agility (SA). This paper examines the direct and indirect impact of digital transformation to the performance of the SMEs under the influence of strategic agility as a dependent variable, concentrating on service-sector SMEs in Pakistan. A questionnaire was developed and the managers and top executives (n=250) were used to fill out the structured questionnaires and the data analyzed through Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings suggest that digital transformation has a major impact on improving strategic agility, which positively affects the performance of firms. There is also a direct positive relationship between digital transformation and performance, and strategic agility mediates the relationship to some extent. These results indicate that digital technologies do not suffice to deliver high-performance levels, but they should be utilized with the help of agile practices and dynamic capabilities. The research is relevant to the literature since it combines DT and SA in a developing-country SME environment, and provides effective insights that could be used by managers and policymakers to facilitate the use of digital and agility toward sustainable organizational development.