Digital capabilities in emerging market firms: Construct development, scale validation, and implications for SMEs

Abstract

New digital technologies are changing how firms conduct business, and developing digital capabilities is becoming increasingly crucial for resource-constrained firms in emerging markets to remain competitive upon digital disruption. However, despite this recognized necessity, there is still a limited understanding of the factors driving the development of digital capabilities in these firms, given the difference in the success rates of digital technology implementation. Employing a multi-study approach involving a quantitative survey, this work conceptualizes the development of digital capabilities in small and medium enterprises (SMEs). It validates and proposes a multi-item measurement scale (ORGDIGCAP) for assessing digital capabilities in SMEs. The scale proposes three dimensions: learning, adoption, and integration of digital technologies. However, the adoption dimension was not relevant in measuring digital capabilities. Using data from 137 SMEs in Mexico, we test the direct relationship between firm digital capabilities and digital agility and their indirect relationship through the mediating mechanism of digital strategy. Our findings provide insights into the role of digital capability advancement and digital strategy formulation in fostering digital agility for the competitiveness of SMEs in the digital age. This study contributes to understanding the key drivers of digital capability development in emerging market SMEs. It highlights the essential measures these businesses must take to succeed in the current unpredictable digital marketplace.