Confronting Digital Strategic Orientation and Digital Technologies on MSMEs' Performance in Emerging Countries

ABSTRACT This study tests the different effects of digital strategic orientation and digital technologies on the performance of micro, small and medium‐sized enterprises (MSMEs) in Peru. It also explores the mediating effect of innovation on the relationship between these variables and MSME performance. Small businesses still struggle to seize the potential benefits of digitalization, creating a need for further empirical evidence on this matter. To test our hypotheses, we apply a structural equation model to a statistically significant sample of 345 MSMEs, analyzing direct, indirect and total effects. The analysis is conducted through a theoretical lens combining the technology–organization–environment (TOE) framework and the technology acceptance model (TAM). The results show that although digital strategic orientation and innovation have a direct effect on MSMEs' performance, digital technologies do not have a direct effect; rather, the effect is channelled through the mediating role of innovation. What is more, the total effect of digital strategic orientation is enhanced by the mediating influence of innovation, whereas the effect of digital technologies becomes significant when mediated by innovation. However, the total effect of the latter is smaller compared to the former. Applying the TOE–TAM framework, we find evidence that helps to understand why many small businesses fail to reap the benefits of digital adoption. Organizational transformation is necessary to fully embrace digitalization; the use of digital technologies is not by itself sufficient.