INFLUENCING FACTORS OF DIGITAL TRANSFORMATION IN DEVELOPING ECONOMIES: A CASE STUDY OF MALAYSIA'S SME SECTOR

Abstract

The digital transformation of SMEs encompasses more than the mere adoption of new technologies; it necessitates comprehensive changes in business processes, organizational structures, and corporate culture. This research leverages the technical, organizational, and environmental (TOE) framework to examine SME leaders' perspectives on the key elements driving digital transformation within their organizations, focusing specifically on organizational factors. Data were collected from 232 Malaysian SME leaders and analyzed using Partial Least Squares Structural Equation Modelling (PLS-SEM) to ensure reliability and test the hypotheses. The findings indicate that digital strategy, technical capability, and managerial capability significantly influence SMEs' ability to digitalize their business processes. These conclusions are framed within the Malaysian context of SMEs, acknowledging that the industrial type of SME participants was not controlled for. The study suggests that SME leaders should formulate strategies to streamline digital transformation and invest in organizational and technological resources to enhance their digitalization efforts, thereby improving their capabilities and international competitiveness.