Digital Transformation in Vietnamese SMEs: Challenges, Opportunities, and Strategic Implications

Abstract

In emerging economies, digital transformation has become a demand for small and medium-sized enterprises (SMEs). However, the organizational pathways for digital adoption translating to measured business value remain not similar. Data survey from 255 SME managers in Vietnam and estimating a partial least squares-structural equation model (PLS-SEM). Using SmartPLS 3 with 5,000 bootstrap resamples, this study focuses on four capability drivers—IT capability, digital transformation strategy, human resource capability, and management support—and evaluates how the digital transformation influences innovation and performance of the firm. The result of the study identifies human resource capability and digital strategy as dominant predictors of digital transformation level (DTL), IT capability, and top management support, which display negative coefficients attributable to suppression under high predictor overlap. Digital transformation strongly increases innovation, and innovation, in turn, is the primary channel through which digital transformation improves performance. The findings focus on capability orchestration and the innovation-mediated route to outcomes in resource-constrained SME settings.