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Investigating how digital technology network embeddedness affects small and medium-sized enterprise growth: A dynamic capabilities perspective

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  • Li, Wencan
  • Wang, Xiao

Abstract

Small and medium-sized enterprises (SMEs) are actively embedding themselves in digital technology networks to leverage disruptive technologies for growth. However, how such embeddedness influences SME growth, particularly whether over-embeddedness is detrimental, remains unclear, creating a critical research gap and leaving SMEs without robust guidance on balancing embeddedness and sustainable development. Grounded in dynamic capability theory, this study examines the nonlinear effects of digital technology network embeddedness on SME growth. Data from 316 Chinese SMEs surveyed in 2024 demonstrate that the structural and relational embeddedness of digital technology networks exhibits inverted U-shaped relationships with SME growth. Although their mediating effect becomes insignificant under over-embeddedness, digital dynamic capabilities mediate this relationship. Moreover, entrepreneurship reinforces the positive effect of relational embeddedness on digital dynamic capabilities and enhances the impact of digital dynamic capabilities on growth. The implications of these findings are significant for SMEs, suggesting that they should proactively engage with digital technology networks to access diversified digital resources and enhance digital dynamic capabilities for growth while being alert to the risks of over-embeddedness. Additionally, SMEs should focus on cultivating digital dynamic capabilities to transform network resources into growth momentum while fostering entrepreneurship characterized by innovativeness, risk-taking, and proactiveness.

Suggested Citation

  • Li, Wencan & Wang, Xiao, 2026. "Investigating how digital technology network embeddedness affects small and medium-sized enterprise growth: A dynamic capabilities perspective," Technological Forecasting and Social Change, Elsevier, vol. 223(C).
    • Handle: RePEc:eee:tefoso:v:223:y:2026:i:c:s0040162525004731
    DOI: 10.1016/j.techfore.2025.124442
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    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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