The Effects of Business Digitalization and Knowledge Management Practices on Business Performance

Abstract

The relentless advance of digitalization has transformed the business landscape, offering new opportunities and challenges for enterprises across industries. This study explores the intricate interplay between business digitalization, knowledge management practices, and business performance, with a specific focus on Micro, Small, and Medium Enterprises (MSMEs). By analyzing data from a diverse group of entrepreneurs and organizations, this research sheds light on the critical factors driving success in the digital age. The study's findings reveal that digitalization is not merely a buzzword but a tangible force shaping the destiny of businesses. It highlights the positive and significant impact of digitalization on knowledge management practices within MSMEs. Moreover, it underscores the mediating role of knowledge management in the relationship between digitalization and business performance, emphasizing the importance of holistic approaches to these domains. Key dimensions of digital capability, including basic digital capabilities, digital operation capabilities, and digital integration capabilities, are identified as significant drivers of business performance. Additionally, business model innovation emerges as a potent catalyst, propelled by digital capabilities, for enhancing organizational outcomes. The study underscores the importance of business leaders adopting digital strategies, fostering a culture of continuous learning, and leveraging social media platforms for market engagement. Furthermore, the study provides a nuanced understanding of the demographic and organizational profiles of MSMEs, shedding light on factors such as gender diversity, educational backgrounds, firm size, and age. These factors are shown to influence the adoption and impact of digitalization and knowledge management practices. In conclusion, this research underscores the transformative power of digitalization and knowledge management in shaping the performance of MSMEs. It offers actionable insights for business leaders, policymakers, and researchers, emphasizing the need for proactive engagement with digital technologies and the cultivation of knowledge-centric organizational cultures. As the digital landscape continues to evolve, this study contributes valuable perspectives to navigate the complexities of the digital age.