Systemic Dynamics of Knowledge Sharing and Digital Transformation: Evidence from Bhutanese MSEs

Digital transformation has become a strategic imperative for micro and small enterprises (MSEs) in emerging economies, yet the mechanisms linking digitalization to performance outcomes remain underexplored. This study examines how the strategic emphasis on digital transformation and the breadth of technology adoption influence firm performance among MSEs in Bhutan. Drawing on an integrative theoretical framework combining diffusion of innovations theory, the resource-based view, and institutional theory, survey data from 217 MSEs were analyzed using regression and interaction modeling techniques. The findings indicate that firms with stronger digital strategic emphasis adopt a broader range of technologies and achieve superior performance. However, unstructured or excessive knowledge sharing negatively moderates these relationships, potentially creating cognitive overload and impeding digital strategy execution. Furthermore, tourism enterprises exhibit significantly higher levels of digital engagement compared to non-tourism counterparts, highlighting the role of sector-specific institutional pressures. By uncovering the systemic dynamics between strategic orientation, technology adoption, and knowledge flows, this study contributes to a deeper understanding of how digital transformation processes can be optimized in resource-constrained environments. These findings not only offer practical insights for enhancing digital readiness and organizational resilience among small enterprises but also contribute to the broader theoretical discourse on how strategic orientation and contextual moderators shape the effectiveness of digital transformation in emerging markets.