The Impact of Digital Capability on Firm Performance and Growth in Incumbent SMEs

Sanna Joensuu-Salo and Marko Matalamäki
Additional contact information
Sanna Joensuu-Salo: Seinäjoki University of Applied Sciences, Finland
Marko Matalamäki: Seinäjoki University of Applied Sciences, Finland

Journal of Enterprising Culture (JEC), 2023, vol. 31, issue 02, 211-232

Abstract: This study examines the effect of digital capability on firm performance and firm growth. We apply the resource-based view and especially its expansion of the dynamic capabilities perspective to illustrate how digital capability is positively related to firm performance and firm growth, and how firm size is a relevant factor in explaining digital capability in incumbent SMEs. The context of this study is Finnish SMEs. The data were gathered from 242 SME owner-managers and analysed with structural equation modelling. The results show that smaller firms have less digital capability than larger SMEs and that smaller firms struggle with performance indicators. Digital capability is positively related to firm performance and firm growth. Our results indicate that although several factors explain and alter the course of firm growth, digital capability can boost the opportunity creation process, and aid survival in the face of competition. Digital capability is an important resource in SMEs and allows firms to safeguard the sustainability of their business model. We argue that digital capability is strongly related to SME’s management practices and SME owner/manager’s commitment to responding to digital transformation. This research sheds light on the importance of strategic leaders’ perceptions of digital capability on incumbent SMEs’ competitive advantage, and contributes both entrepreneurship theory and practice.

Keywords: Digital capability; firm performance; firm growth; resource-based view; dynamic capabilities (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0218495823500073
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:jecxxx:v:31:y:2023:i:02:n:s0218495823500073

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0218495823500073

Access Statistics for this article

Journal of Enterprising Culture (JEC) is currently edited by Teck-Meng Tan

More articles in Journal of Enterprising Culture (JEC) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().