Digital Transformation and Innovation in Moroccan Small, Medium-Sized, and Very Small Enterprises: Effects on Financial Performance

Abstract In a context shaped by accelerating digitalization, this study examines the effects of digital transformation on the financial performance of Moroccan small and very small enterprises, while emphasizing the mediating role of innovation. Based on a sample of 223 companies across various regions and sectors, the analysis was conducted using partial least squares structural equation modeling to assess the structural relationships between the variables. The results show, first, that digital transformation directly enhances firms’ innovation capacity, confirming its role as a strategic lever for organizational renewal. Second, the study demonstrates that digital transformation has only a marginal direct impact on financial performance, but exerts a strong indirect effect through innovation, which acts as a partial mediator. Furthermore, different forms of innovation process and product affect financial outcomes in distinct ways. These findings highlight the necessity for small and very small enterprises to develop coherent digital strategies that integrate innovation as a driver of competitiveness. The study provides both theoretical and practical recommendations for policymakers, business leaders, and support institutions to strengthen the resilience and performance of Moroccan enterprises in the digital age.