Balancing Technology and Sustainability: The Role of Digital Transformation on Romanian <scp>SMEs</scp>

ABSTRACT Digital transformation plays a central role in the balance between technology and sustainability, especially for small and medium‐sized enterprises (SMEs) in Romania. This study examines the impact of the adoption of digital technologies on the competitiveness, development of digital corporate culture, digital management and ESG (environmental, social, governance) performance of SMEs in the manufacturing sector. Based on 463 valid questionnaires, a model was developed and empirically tested using fsQCA (qualitative comparative fuzzy set analysis) and PLS‐SEM (partial least squares structural equation modeling) methods. The results show that the implementation of digital technologies contributes significantly to improving the competitiveness, performance and ESG practices of SMEs. Companies with a clear digital strategy and an innovative digital culture not only have greater operational efficiency, but also greater social and environmental responsibility. The study makes it clear that digital transformation is not only a strategic driver for sustainability and innovation for SMEs, but also contributes to adaptability and long‐term success. Policy and practice are recommended to expand targeted measures and funding programs to support the digitalization of SMEs to promote the balance between technological advances and sustainable business.