Digital transformation and firm performance in innovative SMEs: The mediating role of business model innovation

Abstract

This study investigates the consequences of digital transformation (DT) over performance in the case of innovative Small and Medium-sized Enterprises (SMEs). SMEs represent a heterogeneous kind of company in terms of capabilities. By focusing on their innovative character as a boundary condition, we increase our understanding of this relationship. We further research the mediating role of business model innovation (BMI) in the relationship between DT and performance. A sample of 434 innovative Spanish SMEs is used to test the research model through Partial Least Squares Structural Equation Modelling (PLS-SEM). We find that BMI partially mediates the positive relationship between DT and performance. This finding extends our understanding of BMI as an alignment tool and a blueprint for innovative SMEs channeling their investments in DT towards the improvement of performance. Finally, we put forward managerial implications and propose future avenues of research.