Business value of SME digitalisation: when does it pay off more?

Small and medium enterprise (SME) digitalisation involves the reinforcement, modification, and renewal of business models with the help of digital technologies. It is widely considered imperative for SMEs to stay relevant in the digital age. Yet, little is known about the conditions under which SME digitalisation improves the performance of SMEs in the IS literature. Guided by the SME literature, we postulate that the business value of SME digitalisation - based on its impact on improving financial firm performance - is dependent on two factors that are particularly relevant to SMEs due to their smallness and flexibility: radical orientation and organisational rigidity. Using data from multiple waves of surveys in 2019-2020 and archival financial data from Dutch SMEs, we demonstrate that the positive impact of SME digitalisation on performance improvement strongly depends on SME characteristics. SMEs who are oriented towards radical change and are more rigid are disadvantaged and attain lower returns on SME digitalisation.

Automated summary

SME digitalisation is crucial for the survival and success of small and medium enterprises in the digital age. However, the factors that determine the effectiveness of SME digitalisation in improving performance are not well understood. This research highlights that the business value of SME digitalisation depends on the orientation towards radical change and the level of organisational rigidity. SMEs with high rigidity and a conservative approach experience lower returns on their digitalisation efforts.