Digital Transformation and Its Impact on Business Performance in SMEs of Pakistan: An Empirical Study

Abstract

This study investigates the pivotal role of digital transformation in enhancing the business performance of Small and Medium Enterprises (SMEs) in Pakistan. Grounded in the Resource-Based View (RBV) theory, the research posits three hypotheses examining the relationships between technology adoption, digital literacy among management, and investment in digital infrastructure with business performance. A stratified random sampling approach was employed to collect data from managers and employees across various Pakistani SMEs. The findings reveal significant positive correlations between the elements of digital transformation and business performance. Specifically, the study indicates that SMEs embracing technological advancements, fostering digital literacy in management, and investing in digital infrastructure demonstrate improved operational efficiency and market adaptability. This research contributes to the understanding of digital transformation in the SME sector, offering valuable insights for practitioners and policymakers. It emphasizes the need for strategic digitalization approaches and highlights the benefits of supportive digital policies for SMEs. While the study offers robust evidence from the Pakistani context, it acknowledges limitations such as self-reporting biases and the need for further research in diverse geographical settings. Future studies are encouraged to explore the long-term impacts and sustainability of digital transformation strategies in SMEs.