STRUCTURAL CAPITAL AND DIGITAL TRANSFORMATION AS CATALYSTS FOR MSME PERFORMANCE

This study investigates the impact of accounting information systems (AIS), digital transformation, business strategy, and structural capital readiness on the financial performance of micro, small, and medium-sized enterprises (MSMEs) in North Sumatra. Employing Structural Equation Modeling–Partial Least Squares (SEM-PLS), this research evaluates both measurement and structural models to ensure construct validity and reliability. The measurement model demonstrates high internal consistency, convergent validity, and discriminant validity across constructs, while the structural model confirms substantial explanatory power (R²) and predictive relevance (Q²). Empirical findings reveal that AIS adoption and digital transformation significantly enhance MSME financial performance, highlighting the strategic role of technology integration in sustaining competitive advantage. Business strategy demonstrates a partial but positive contribution, suggesting that alignment between technological adoption and strategic orientation is necessary to optimize outcomes. Moreover, structural capital readiness strengthens the relationship between digital initiatives and financial performance, emphasizing the importance of organizational support structures. The results contribute to the literature by advancing the theoretical understanding of dynamic capability and resource-based views in the context of MSMEs in emerging economies. Practically, the findings provide policy insights for regulators and managerial implications for MSME owners to prioritize digital adoption, strategic alignment, and structural readiness as pathways to improved performance. Methodologically, this research validates SEM-PLS as an effective approach for capturing complex relationships in MSME studies.