Impact of digital capabilities on entrepreneurial performance in SMEs

Digital transformation is pivotal in corporate development, fundamentally reshaping core business components. Although it is recognized that enhanced digital capabilities improve performance through data-driven processes, existing research has primarily focused on large enterprises. As a result, small and medium-sized enterprises (SMEs) often hesitate to invest due to uncertainties regarding the impact. This study fills this gap by examining the influence of digital capabilities on entrepreneurial performance and advocates for increased SME investment in digital transformation. Analyzing data from 313 SME managers, the results reveal that digital capabilities substantially boost performance, with opportunity capability serving as a critical mediator. Additionally, entrepreneurial leadership strengthens the connection between digital fluency, opportunity capability, and performance. This research highlights the necessity of integrating digital capabilities, opportunity capability, and entrepreneurial leadership to optimize business outcomes, providing practical insights for SMEs to formulate effective digital transformation strategies.