Digital capability, business model innovation, and entrepreneurial performance: The negative moderating role of long-tail strategy

This study examines how digital capabilities affect entrepreneurial performance via business model innovation (BMI), and the moderating role of long-tail strategy in resource constrained SMEs. We propose a moderated mediation model where BMI mediates the link between digital capabilities and entrepreneurial performance, while long-tail strategy moderates the pathway from capabilities to BMI. Using PLS-SEM on questionnaire data from 191 Chinese snack SMEs, we largely support our hypotheses. Results show that (1) digital capabilities significantly enhance both BMI and entrepreneurial performance; (2) BMI partially mediates this relationship; and (3) long-tail strategy exerts a significant negative moderating effect on the relationship between digital capabilities and BMI. This negative moderation implies that, although long-tail strategy has market value, its highly customized, small batch nature may dilute limited digital resources, increase complexity and innovation costs, and thus reduce the efficiency of converting digital capabilities into BMI. Our study uncovers a strategic paradox—not all cutting-edge strategies amplify core competencies—and offers theoretical insights and practical warnings for resource constrained SMEs on prudently aligning capabilities and strategies during digital transformation. Contributions include clarifying how digital capabilities influence entrepreneurial performance, identifying boundary conditions, and providing empirical evidence from traditional industries.