Organizational Factors and Digital Transformation: A Systems Perspective on Small Firms

Although digital readiness is widely recognized as a prerequisite for digital transformation, existing research predominantly adopts a determinant-based perspective, offering limited insight into how readiness actually emerges within organizations. To address this gap, this study develops a systems-based and process-oriented framework explaining how organizational factors translate into digital readiness in small firms. Drawing on Resource-Advantage Theory and a socio-technical systems perspective, a qualitative cross-cultural multiple-case study was conducted in six small service firms located in Brazil and the United Kingdom. The cross-cultural design enabled the identification of recurring organizational mechanisms across different institutional contexts. The findings reveal that organizational factors such as corporate culture, knowledge management, organizational learning, and leadership do not directly generate digital readiness. Instead, their influence depends on Project Management Capability (PMC), which emerged as the central mechanism coordinating and integrating these resources into coherent digital initiatives. Firms with stronger PMC exhibited more structured and strategically aligned digital transformation trajectories, regardless of resource availability. This study contributes to the literature by conceptualizing digital readiness as an emergent organizational outcome rather than a static condition and by positioning PMC as the critical link between organizational factors and digitally enabled competitive advantage in small firms.