From urban digital embeddedness to management decisions: understanding innovative SMEs' digital orientation

Purpose Developed for management decision's “The Practice of Making Decisions” section, this study examines a concrete managerial dilemma: what can managers learn by considering how deeply digital technologies are embedded in the urban environment alongside their availability? We examine how urban digital embeddedness is associated with innovative small and medium-sized enterprise (SMEs') digital orientation (DO) and its four dimensions. Design/methodology/approach The study combines city- and firm-level information for 24 Italian cities and 243 innovative SMEs observed over 13 years. Urban digital embeddedness captures citizens' use of home banking, municipal applications and broadband services. SMEs' DO is derived from annual mission statements and assessed across digital technology scope, digital capabilities, digital ecosystem coordination and digital architecture configuration. Relationships are estimated using a two-way fixed-effects Spatial Durbin Panel Model. Findings The findings show that urban digital embeddedness is most consistently associated with firms' stated digital capabilities and digital ecosystem coordination, followed by digital architecture configuration, while evidence for digital technology scope is comparatively weak. Practical implications Managers should look beyond digital technologies when making digital-strategy decisions and consider how technologies are actually embedded in the surrounding environment. Urban digital embeddedness can provide decision-relevant signals when evaluating locations, setting investment priorities, assessing external ecosystems and planning firms' digital transformation. Originality/value The study reframes the smart city as a managerial decision environment rather than a technological backdrop. It positions urban digital embeddedness as a source of contextual signals and DO as the organisational expression of strategic digital choices made by managers.