From community embeddedness to digital transformation: institutional change in village-owned social enterprises

Purpose This study examines digital transformation in village-owned enterprises (VOEs) as an institutional process shaped by internal organizational conditions, external drivers and relational resources. It aims to explain how digital adoption emerges, how it translates into organizational performance, and how business networks condition this relationship in community-based social enterprises operating in emerging economies. Design/methodology/approach The study uses a sequential exploratory mixed-method design. Qualitative insights from focus group discussions with nine VOEs were used to contextualize digital practices and inform model development. The proposed framework was subsequently tested using survey data from 578 VOE directors in Central Java, Indonesia. Hayes’ PROCESS Macro Model 14 was used to examine direct, mediating, moderating and moderated mediation relationships. Findings The results show that organizational readiness and digital leadership, as internal enablers and government support and market demand, as external drivers, have significant positive effects on digital adoption. Digital adoption, in turn, is positively associated with VOE performance and mediates the relationships between internal and external factors and performance outcomes. Business networks strengthen the effect of digital adoption on VOE performance and condition the indirect effects, indicating the presence of moderated mediation. Research limitations/implications This study focuses on VOEs using a cross-sectional design, which limits the ability to capture dynamic processes and constrains broader generalizability. Nonetheless, the study provides an integrated framework for understanding how organizational, institutional and relational factors jointly shape digital transformation in rural social enterprises. Originality/value This study provides novel empirical evidence that digital transformation in village-based social enterprises extends beyond technological adoption and reflects a broader institutional and relational process. The findings suggest that digital adoption functions as an institutional mechanism linking organizational conditions, external support and organizational performance in resource-constrained community settings.