Digital Transformation and its Effects on the Financial Performance of Malaysian SMEs

This study investigates the impact of digital transformation on the financial performance of Small and Medium Enterprises (SMEs) in Malaysia, a critical area given the country's ambition to become a digitally-driven economy. By integrating the Resource-Based View (RBV) and Dynamic Capabilities Theory, the research explores how the adoption of digital technologies, such as cloud computing and digital marketing, influences key financial metrics including profitability, revenue growth, and cost efficiency. The study highlights the moderating roles of firm size and industry sector, offering new insights into the conditions under which digital transformation is most effective. Through empirical analysis, the findings provide valuable guidance for SME owners, managers, and policymakers, emphasizing the importance of strategic digital adoption to enhance financial outcomes and contribute to Malaysia's broader economic goals. The research also identifies challenges such as digital skills gaps and infrastructure disparities, proposing targeted strategies to support SMEs in their digital transformation journey.