IDEAS home Printed from https://ideas.repec.org/a/eee/soceps/v98y2025ics0038012124003240.html
   My bibliography  Save this article

Enhancing SMEs sustainable innovation and performance through digital transformation: Insights from strategic technology, organizational dynamics, and environmental adaptation

Author

Listed:
  • Wang, Shaofeng
  • Zhang, Hao

Abstract

With the advent of the digital wave, understanding the impact of Digital Transformation on sustainable development in firms is increasingly important. Drawing from the Technology-Organization-Environment (TOE) framework and the Dynamic capability view, this study investigates the determinants of Digital Transformation and its impact on Sustainable Innovation Capability and Sustainable Organizational Performance. Data from 261 firms were collected via surveys and analyzed using partial least squares structural equation modeling (PLS-SEM) and fuzzy-set qualitative comparative analysis (fsQCA). The results demonstrate that Technology, Organization, and Environment are critical factors driving Digital Transformation. Digital Transformation can enhance Sustainable Organizational Performance by improving a firm's Sustainable Innovation Capability. Environmental Dynamism positively moderates the effect of Digital Transformation on Sustainable Innovation Capability and Sustainable Organizational Performance. Importance-performance map analysis (IPMA) confirms Digital Transformation as the most significant predictor of Sustainable Organizational Performance. fsQCA identifies three configurations leading to highly Sustainable Organizational Performance. These findings provide new theoretical evidence for understanding the relationships among Digital Transformation, Sustainable Innovation Capability, and Sustainable Organizational Performance and the moderating role of Environmental Dynamism in these relationships. This study offers a new perspective on the relationship between Digital Transformation and sustainable development and supports applying TOE framework, and Dynamic capability view. The results are significant for understanding the drivers of Digital Transformation and its impact on sustainable development in firms.

Suggested Citation

  • Wang, Shaofeng & Zhang, Hao, 2025. "Enhancing SMEs sustainable innovation and performance through digital transformation: Insights from strategic technology, organizational dynamics, and environmental adaptation," Socio-Economic Planning Sciences, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:soceps:v:98:y:2025:i:c:s0038012124003240
    DOI: 10.1016/j.seps.2024.102124
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0038012124003240
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.seps.2024.102124?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Shaofeng Wang & Mengjia Gao & Hao Zhang, 2024. "Strengthening SMEs competitiveness and performance via industrial internet: Technological, organizational, and environmental pathways," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.
    2. Wang, Shaofeng & Zhang, Hao, 2024. "Green entrepreneurship success in the age of generative artificial intelligence: The interplay of technology adoption, knowledge management, and government support," Technology in Society, Elsevier, vol. 79(C).
    3. Daimi, Sarra & Rebai, Sonia, 2023. "Sustainability performance assessment of Tunisian public transport companies: AHP and ANP approaches," Socio-Economic Planning Sciences, Elsevier, vol. 89(C).
    4. Kirti Nayal & Rakesh D. Raut & Vinay Surendra Yadav & Pragati Priyadarshinee & Balkrishna E. Narkhede, 2022. "RETRACTED: The impact of sustainable development strategy on sustainable supply chain firm performance in the digital transformation era," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 845-859, March.
    5. Ancillai, Chiara & Sabatini, Andrea & Gatti, Marco & Perna, Andrea, 2023. "Digital technology and business model innovation: A systematic literature review and future research agenda," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    6. Guandalini, Ilaria, 2022. "Sustainability through digital transformation: A systematic literature review for research guidance," Journal of Business Research, Elsevier, vol. 148(C), pages 456-471.
    7. Troise, Ciro & Corvello, Vincenzo & Ghobadian, Abby & O'Regan, Nicholas, 2022. "How can SMEs successfully navigate VUCA environment: The role of agility in the digital transformation era," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    8. Bacon, Emily & Williams, Michael D. & Davies, Gareth, 2020. "Coopetition in innovation ecosystems: A comparative analysis of knowledge transfer configurations," Journal of Business Research, Elsevier, vol. 115(C), pages 307-316.
    9. Dhir, Amandeep & Khan, Sher Jahan & Islam, Nazrul & Ractham, Peter & Meenakshi, N., 2023. "Drivers of sustainable business model innovations. An upper echelon theory perspective," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    10. Benedetti, Ilaria & Guarini, Giulio & Laureti, Tiziana, 2023. "Digitalization in Europe: A potential driver of energy efficiency for the twin transition policy strategy," Socio-Economic Planning Sciences, Elsevier, vol. 89(C).
    11. Rita Cannas, 2023. "Exploring digital transformation and dynamic capabilities in agrifood SMEs," Journal of Small Business Management, Taylor & Francis Journals, vol. 61(4), pages 1611-1637, July.
    12. wael AL-khatib, Ayman, 2023. "Drivers of generative artificial intelligence to fostering exploitative and exploratory innovation: A TOE framework," Technology in Society, Elsevier, vol. 75(C).
    13. Chatzistamoulou, Nikos, 2023. "Is digital transformation the Deus ex Machina towards sustainability transition of the European SMEs?," Ecological Economics, Elsevier, vol. 206(C).
    14. Venkataiah Chittipaka & Satish Kumar & Uthayasankar Sivarajah & Jana Lay-Hwa Bowden & Manish Mohan Baral, 2023. "Blockchain Technology for Supply Chains operating in emerging markets: an empirical examination of technology-organization-environment (TOE) framework," Annals of Operations Research, Springer, vol. 327(1), pages 465-492, August.
    15. Maroufkhani, Parisa & Desouza, Kevin C. & Perrons, Robert K. & Iranmanesh, Mohammad, 2022. "Digital transformation in the resource and energy sectors: A systematic review," Resources Policy, Elsevier, vol. 76(C).
    16. Montero Guerra, José Manuel & Danvila-del-Valle, Ignacio & Méndez Suárez, Mariano, 2023. "The impact of digital transformation on talent management," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    17. Škare, Marinko & Gavurova, Beata & Porada-Rochon, Malgorzata, 2024. "Digitalization and carbon footprint: Building a path to a sustainable economic growth," Technological Forecasting and Social Change, Elsevier, vol. 199(C).
    18. Kathleen M. Eisenhardt & Jeffrey A. Martin, 2000. "Dynamic capabilities: what are they?," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 1105-1121, October.
    19. Verhoef, Peter C. & Broekhuizen, Thijs & Bart, Yakov & Bhattacharya, Abhi & Qi Dong, John & Fabian, Nicolai & Haenlein, Michael, 2021. "Digital transformation: A multidisciplinary reflection and research agenda," Journal of Business Research, Elsevier, vol. 122(C), pages 889-901.
    20. Martín-Rojas, Rodrigo & Garrido-Moreno, Aurora & García-Morales, Víctor J., 2023. "Social media use, corporate entrepreneurship and organizational resilience: A recipe for SMEs success in a post-Covid scenario," Technological Forecasting and Social Change, Elsevier, vol. 190(C).
    21. Rameshwar Dubey & David Bryde & Constantin Blome & David Roubaud & Mihalis Giannakis, 2021. "Facilitating artificial intelligence powered supply chain analytics through alliance management during the pandemic crises in the B2B context," Post-Print hal-03233551, HAL.
    22. Alok Raj & Anand Jeyaraj, 2023. "Antecedents and consequents of industry 4.0 adoption using technology, organization and environment (TOE) framework: A meta-analysis," Annals of Operations Research, Springer, vol. 322(1), pages 101-124, March.
    23. Lei, Xiao & Shen, Z.Y. & Štreimikienė, Dalia & Baležentis, Tomas & Wang, Guang & Mu, Yunguo, 2024. "Digitalization and sustainable development: Evidence from OECD countries," Applied Energy, Elsevier, vol. 357(C).
    24. Borah, Prasad Siba & Iqbal, Shuja & Akhtar, Shamim, 2022. "Linking social media usage and SME's sustainable performance: The role of digital leadership and innovation capabilities," Technology in Society, Elsevier, vol. 68(C).
    25. Agarwal, Vernika & Mathiyazhagan, K. & Malhotra, Snigdha & Pimpunchat, Busayamas, 2023. "Building resilience for sustainability of MSMEs post COVID-19 outbreak: An Indian handicraft industry outlook," Socio-Economic Planning Sciences, Elsevier, vol. 85(C).
    26. Mäkitie, Tuukka & Hanson, Jens & Damman, Sigrid & Wardeberg, Mari, 2023. "Digital innovation's contribution to sustainability transitions," Technology in Society, Elsevier, vol. 73(C).
    27. Zareian Beinabadi, Hanieh & Baradaran, Vahid & Rashidi Komijan, Alireza, 2024. "Sustainable supply chain decision-making in the automotive industry: A data-driven approach," Socio-Economic Planning Sciences, Elsevier, vol. 95(C).
    28. Feroz, Abdul Karim & Zo, Hangjung & Eom, Jiyong & Chiravuri, Ananth, 2023. "Identifying organizations’ dynamic capabilities for sustainable digital transformation: A mixed methods study," Technology in Society, Elsevier, vol. 73(C).
    29. Kim, Jae Moon & Park, Ji-Hoon, 2024. "When is digital transformation beneficial for coupled open innovation? The contingent role of the adoption of industry 4.0 technologies," Technovation, Elsevier, vol. 136(C).
    30. Ranjan, Piyush, 2024. "Unraveling the mystery of the link between digital orientation and innovation performance: The interplay of digital business capability and environmental dynamism," Technovation, Elsevier, vol. 131(C).
    31. Kyle C. Longest & Stephen Vaisey, 2008. "fuzzy: A program for performing qualitative comparative analyses (QCA) in Stata," Stata Journal, StataCorp LLC, vol. 8(1), pages 79-104, February.
    32. David J. Teece, 2007. "Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance," Strategic Management Journal, Wiley Blackwell, vol. 28(13), pages 1319-1350, December.
    33. Malesios, Chrisovalantis & De, Debashree & Moursellas, Andreas & Dey, Prasanta Kumar & Evangelinos, Konstantinos, 2021. "Sustainability performance analysis of small and medium sized enterprises: Criteria, methods and framework," Socio-Economic Planning Sciences, Elsevier, vol. 75(C).
    34. Radicic, Dragana & Petković, Saša, 2023. "Impact of digitalization on technological innovations in small and medium-sized enterprises (SMEs)," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    35. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    36. Zhao, Xiaoyang & Weng, Zongyuan, 2024. "Digital dividend or divide: The digital economy and urban entrepreneurial activity," Socio-Economic Planning Sciences, Elsevier, vol. 93(C).
    37. Kraus, Sascha & Durst, Susanne & Ferreira, João J. & Veiga, Pedro & Kailer, Norbert & Weinmann, Alexandra, 2022. "Digital transformation in business and management research: An overview of the current status quo," International Journal of Information Management, Elsevier, vol. 63(C).
    38. Matarazzo, Michela & Penco, Lara & Profumo, Giorgia & Quaglia, Roberto, 2021. "Digital transformation and customer value creation in Made in Italy SMEs: A dynamic capabilities perspective," Journal of Business Research, Elsevier, vol. 123(C), pages 642-656.
    39. ElMassah, Suzanna & Mohieldin, Mahmoud, 2020. "Digital transformation and localizing the Sustainable Development Goals (SDGs)," Ecological Economics, Elsevier, vol. 169(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marino-Romero, Jorge Alberto & Palos-Sánchez, Pedro R. & Velicia-Martín, Félix, 2024. "Evolution of digital transformation in SMEs management through a bibliometric analysis," Technological Forecasting and Social Change, Elsevier, vol. 199(C).
    2. Ga-Rog Han & Jae-Eun Lee, 2024. "The Moderating Effect of ESG Level in the Relationship between Digital Transformation Capability and Financial Performance: Evidence from Foreign Subsidiaries of Korean Firms," Sustainability, MDPI, vol. 16(9), pages 1-15, April.
    3. Brewis, Claire & Dibb, Sally & Meadows, Maureen, 2023. "Leveraging big data for strategic marketing: A dynamic capabilities model for incumbent firms," Technological Forecasting and Social Change, Elsevier, vol. 190(C).
    4. Daliborka Witschel & Julian Marius Müller & Kai-Ingo Voigt, 2023. "What Takes the Wind out of Their Sails? A Micro-Foundational Perspective of Challenges for Building Dynamic Capabilities Towards Digital Business Model Innovation," Schmalenbach Journal of Business Research, Springer, vol. 75(3), pages 345-388, September.
    5. Xiang, Guopeng & Peng, Mixiang & Tang, Fei & Liu, Yuan, 2024. "Unpacking the impact of entrepreneurial learning on business model innovation in internet startups: Mediating roles of digital capabilities," Technology in Society, Elsevier, vol. 77(C).
    6. Valero-Gil, Jesús & Suárez-Perales, Inés & Garcés-Ayerbe, Concepción & Rivera-Torres, Pilar, 2024. "Navigating toward the promised land of digitalization and sustainability convergence," Technological Forecasting and Social Change, Elsevier, vol. 202(C).
    7. Laudien, Sven M. & Reuter, Ute & Sendra Garcia, Francisco Javier & Botella-Carrubi, Dolores, 2024. "Digital advancement and its effect on business model design: Qualitative-empirical insights," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    8. Changwei Pang & Qiong Wang, 2024. "How Digital Transformation Promotes Disruptive Innovation? Evidence from Chinese Entrepreneurial Firms," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 7788-7818, June.
    9. Annosi, Maria Carmela & Capo, Francesca & Appio, Francesco Paolo & Bedetti, Ivan, 2023. "Unveiling micro-foundations of digital transformation: Cognitive models, routines, and organizational structures in agri-food SMEs," Technological Forecasting and Social Change, Elsevier, vol. 197(C).
    10. Kroh, Julia & Globocnik, Dietfried & Schultz, Carsten & Holdhof, Frederike & Salomo, Søren, 2024. "Micro-foundations of digital innovation capability – A mixed method approach to develop and validate a multi-dimensional measurement instrument," Technological Forecasting and Social Change, Elsevier, vol. 198(C).
    11. Roy, Sanjit K. & Tehrani, Ali N. & Pandit, Ameet & Apostolidis, Chrysostomos & Ray, Subhasis, 2025. "AI-capable relationship marketing: Shaping the future of customer relationships," Journal of Business Research, Elsevier, vol. 192(C).
    12. Soluk, Jonas & Decker-Lange, Carolin & Hack, Andreas, 2023. "Small steps for the big hit: A dynamic capabilities perspective on business networks and non-disruptive digital technologies in SMEs," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    13. Li, Zhijun & Zhang, Runze & Li, Qingyi & Wang, Yuchen, 2025. "How does a closed social network facilitate the impact of blockchain on corporate digital innovation performance?," Journal of Business Research, Elsevier, vol. 191(C).
    14. Tortora, Debora & Chierici, Roberto & Farina Briamonte, Massimiliano & Tiscini, Riccardo, 2021. "‘I digitize so I exist’. Searching for critical capabilities affecting firms’ digital innovation," Journal of Business Research, Elsevier, vol. 129(C), pages 193-204.
    15. Kevin Escoz Barragan & Felix Simon Rudolf Becker, 2025. "Keeping pace with the digital transformation — exploring the digital orientation of SMEs," Small Business Economics, Springer, vol. 64(3), pages 1361-1385, March.
    16. Trujillo-Gallego, Mariana & Sarache, William & Sousa Jabbour, Ana Beatriz Lopes de, 2022. "Digital technologies and green human resource management: Capabilities for GSCM adoption and enhanced performance," International Journal of Production Economics, Elsevier, vol. 249(C).
    17. Bernardo Henrique Leso & Marcelo Nogueira Cortimiglia & Antonio Ghezzi & Vinicius Minatogawa, 2024. "Exploring digital transformation capability via a blended perspective of dynamic capabilities and digital maturity: a pattern matching approach," Review of Managerial Science, Springer, vol. 18(4), pages 1149-1187, April.
    18. Qi Yao & Hongjuan Tang & Francis Boadu & Yu Xie, 2023. "Digital Transformation and Firm Sustainable Growth: The Moderating Effects of Cross-border Search Capability and Managerial Digital Concern," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4929-4953, December.
    19. Nadia Zahoor & Huda Khan & Zaheer Khan & Pervaiz Akhtar, 2024. "Responsible innovation in emerging markets’ SMEs: The role of alliance learning and absorptive capacity," Asia Pacific Journal of Management, Springer, vol. 41(3), pages 1175-1209, September.
    20. Nadeem, Kashif & Wong, Sut I. & Za, Stefano & Venditti, Michelina, 2024. "Digital transformation and industry 4.0 employees: Empirical evidence from top digital nations," Technology in Society, Elsevier, vol. 76(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:soceps:v:98:y:2025:i:c:s0038012124003240. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/seps .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.