Does managerial propensity towards digitalization enhances firm performance? A case study of Indian MSMEs

Abstract

The objective of this study is to investigate how digital capabilities impact the performance of Indian MSMEs in the current "new normal" context, with a specific focus on the firm-level perspective. The study aims to explore the relationship between digitalization and firm performance while identifying the key elements that contribute to the effective implementation of digitalization in the MSME sector. A seven-point Likert scale questionnaire was provided to top and middle managers working in Indian MSMEs in order to collect data. The collected data, comprised of 250 usable questionnaires, was analyzed using the partial least squares structural equation modeling (PLS-SEM) technique. The analysis of the data reveals a positive correlation between digitalization, managerial proficiency, and the performance of MSMEs. Additionally, it demonstrates that digitalization moderates the relationship between technological preparedness, implementation charges, and MSMEs' performance.  However, the performance of the Manufacturing segment within MSMEs and digitalization are not significantly impacted by managerial tendency, according to the study. This study is the first of its kind to examine managerial propensity as a moderator of digitalization and MSMEs' performance. The findings highlight the importance of digital skills for MSMEs and offer insightful information about the obstacles to their successful digital transformation. It highlights the importance for MSME managers, owners, policymakers, and practitioners to understand these barriers and effectively overcome them. The findings of this study hold practical implications for MSME managers and owners, policymakers, and practitioners. They provide valuable guidance in comprehending the obstacles that MSMEs encounter in achieving successful digital transformation. By addressing these barriers, stakeholders can offer support to MSMEs in leveraging digital capabilities to enhance their performance and competitiveness within the current "new normal" context.