Business value of SME digitalisation: when does it pay off more?

ABSTRACT

Small and medium enterprise (SME) digitalisation involves the reinforcement, modification, and renewal of business models with the help of digital technologies. It is widely considered imperative for SMEs to stay relevant in the digital age. Yet, little is known about the conditions under which SME digitalisation improves the performance of SMEs in the IS literature. Guided by the SME literature, we postulate that the business value of SME digitalisation – based on its impact on improving financial firm performance – is dependent on two factors that are particularly relevant to SMEs due to their smallness and flexibility: radical orientation and organisational rigidity. Using data from multiple waves of surveys in 2019–2020 and archival financial data from Dutch SMEs, we demonstrate that the positive impact of SME digitalisation on performance improvement strongly depends on SME characteristics. SMEs who are oriented towards radical change and are more rigid are disadvantaged and attain lower returns on SME digitalisation.

KEYWORDS:

• SME digitalisation
• digital business models
• digital transformation
• radical orientation
• organisational rigidity
• business value of digitalisation

Disclosure statement

No potential conflict of interest was reported by the authors.

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/0960085X.2023.2167671.

Notes

1. In defining digital transformation, we follow the literature (Hanelt et al., 2021; Verhoef et al., 2021; Vial, 2019; Wessel et al., 2021) and define it as the change caused by the introduction of digital technologies to the value-creating structures and organisational identity of the organisation.

2. In this study, we investigate digitalisation at the organisational level (e.g., Baiyere et al., 2020; Morton et al., 2020; Singh et al., 2020; Vial, 2019), while profound digital changes may also occur at the individual level (e.g., Baptista et al., 2020), ecosystem level (e.g., Tan et al., 2020), industry level (e.g., Karimi & Walter, 2015; Lanamäki et al., 2020), or societal level (e.g., Dengler & Matthes, 2018).

3. We assessed whether systematic differences exist in the perceptions of SME digitalisation across respondent groups based on functional roles, but independent sample t-tests between the four groups (owners, executive managers, both, and others) show no statistically significant differences (p > 0.05) across the different types of respondents.

4. We treat all our constructs as formative/composite because our items determine the latent variable instead of the other way around. For example, for SME digitalisation, altering a component of the business model does not necessarily covary with changing another digital component (Jarvis et al., 2003). We believe that all relevant aspects of SME digitalisation were covered by our items, and that it is unlikely that we misconstrue SME digitalisation construct through the omission of important aspects, because there is a strong overlap between our business model components and those used in other studies (e.g., Parida et al., 2019). For other constructs, we apply a similar reasoning and treat them as formative/composite.

5. In a robustness check, we augmented our survey data with archival financial data for equity-to-asset ratio, which generated consistent results.

6. While common method bias can potentially inflate correlations for bivariate relationships, it attenuates the significance of interaction terms and cannot artificially create statistically significant interaction effects (Siemsen et al., 2010). Finding statistically significant interaction effects, “despite the influence of CMV in the data set should be taken as strong evidence that an interaction effect exists.” (p. 470).