Impact of Digital Service Usage on the Human Resources Management Capacities of Vietnamese Small and Medium-Scale Enterprises

Background: There is a growing demand for small and medium-sized businesses (SMEs) to utilise digital services to stay competitive in an era of rapid digital transformation. One of the areas most significantly impacted by digital tools is human resource management (HRM), as they have made it easier to recruit, train, and develop employees. Objective: This study examines the impact of digital service usage on Vietnamese SMEs' HRM capabilities. It explores how leadership support, organisational readiness, policy procedures, perceived benefits, and company culture affect digital adoption and HRM development. Methodology: Mixed methods were used. Interviews with 30 digital transformation specialists from five major cities refined measuring scales in the qualitative phase. Between July 2024 and February 2025, 1.000 SME managers in five provinces and five cities in Vietnam provided quantitative data. SEM was used to evaluate 11 hypotheses. Result: Critically supporting all assumptions and digital service usage boosts HRM capacity and modulates other variables. Leadership supports best-predicted adoption and HRM results. Other elements, such as perceived benefits, policy procedures, and organisational preparation, also mattered. Conclusion: Digital adoption plays a central role in enhancing HRM capacity in SMEs. Strategic leadership and supportive policy environments are critical factors for success. Unique Contribution: This study presents an integrated framework that combines digital transformation and HRM theories, supported by novel empirical evidence from an emerging economy. Moreover, this is one of the studies to examine and assess the impact of digital services on improving HRM capacity in SMEs, providing a practical roadmap for digital HR transformation in developing nations. Key Recommendation: Policymakers and SME leaders should prioritise digital leadership, infrastructure investment, and incentive policies to foster sustainable HRM development.