The human element in digital transformation: The role of talent management for SMEs

The role of digitalization for business performance has attracted significant research interest. While many studies have advanced the literature with insights on digital tools and strategies, what is less well understood is the role of the human factor in this process. The objective of this study is to assess the role of the human element in the digitalization of small and medium-sized enterprises (SMEs). Theoretically, we draw on sociotechnical theory and dynamic capabilities to underline the importance of integrating the technology and human aspects for enhancing SME performance. Empirically, we use a representative dataset of 1, 000 Bulgarian SMEs and perform structural equations modeling. Our findings reveal that the existence of digital strategies by themselves may not lead to improved performance unless they are well integrated with the appropriate talent management practices that support organizational agility. The results underscore the importance of considering the pathways through which digital strategy affects organizational performance for SMEs.