Digital Transformation and Business Innovation in UAE SMEs: Drivers, Challenges, and Future Opportunities

Digital transformation (DT) has become a critical driver of economic growth and innovation, reshaping industries through technologies like AI, cloud computing, and IoT. In the UAE, DT is a strategic priority, supported by initiatives such as Smart Dubai and the UAE National AI Strategy 2031. However, while large corporations lead this transformation, small and medium-sized enterprises (SMEs)—constituting 94% of businesses and 86% of the private workforce—face challenges in adoption due to financial constraints, skills shortages, and regulatory complexities. This review systematically examines DT’s role in business innovation, focusing on UAE SMEs, to identify key drivers, barriers, and opportunities. It highlights the transformative potential of AI and blockchain, explores policy and infrastructure enablers, and analyzes challenges like cybersecurity risks and legacy systems. The study also discusses emerging opportunities in fintech, e-commerce, and cloud solutions, proposing future research directions in sector-specific DT strategies, policy evaluation, and ethical AI adoption. By integrating theoretical insights with practical case studies, this review offers actionable recommendations for policymakers and business leaders to enhance SME competitiveness in the digital economy.