Impact of Digital Transformation on the Sustainability Performance of SMEs: The Moderating Role of Government Digital Support

This study examines the association between digital transformation and the sustainable performance of small and medium-sized enterprises by considering the mediating roles of green innovation capability and dynamic capabilities and the moderating role of government digital support. The study integrates organizational capabilities and institutional support into a unified mechanism for explaining how digitalization is associated with economic, environmental, and social performance outcomes in an emerging economy. A two-stage design was employed: a qualitative instrument-refinement phase with structured discussions involving 35 enterprise directors in Ho Chi Minh City and Dong Nai, followed by a cross-sectional quantitative survey. This Study distributed 800 online questionnaires to respondents involved in digital transformation activities and retained 751 usable responses. The conceptual model comprised five reflective constructs and ten hypotheses. The study results show that digital transformation has the strongest direct positive association with sustainable performance and is also positively associated with green innovation capability and dynamic capabilities. Green innovation capability partially mediates the relationships between digital transformation and sustainable performance and between dynamic capabilities and sustainable performance. By contrast, dynamic capabilities do not independently mediate the digital transformation-sustainable performance relationship. Government digital support is positively associated with sustainable performance and strengthens the positive relationship between green innovation capability and sustainable performance. Given the cross-sectional, single-informant design, the findings are interpreted as associations rather than causal effects. The results suggest that managers should align digital investments with green innovation objectives, while policymakers should design digital support programs that help enterprises translate technology adoption into scalable, sustainable business outcomes.