Analysing the influence of digital strategy and innovation on MSMEs' performance in emerging countries

Drawing on the technology–organization–environment (TOE) framework, the diffusion of innovation (DOI) theory and the technology acceptance model (TAM), this research analyses how digital strategic orientation has a direct influence on the performance of micro, small and medium‐sized enterprises (MSMEs) in emerging markets and an indirect influence mediated by innovation. Using a representative sample of Peruvian MSMEs, we shed light on the sometimes inconclusive evidence on why small business struggle to benefit from digitalization, a particularly key issue in emerging economies. The structural equation model used shows that the impact of digitalization on firm performance is significant, as is the mediating effect of innovation. Our results imply that the total effect of digitalization on performance will be greater if the MSMEs develop innovative activities. Furthermore, we show that the performance effect requires not only digital technology but also the involvement of the entire organization.