Conceptualizing Digital Readiness, Strategic Foresight, and Strategic Flexibility as Drivers of Digitalization and Performance of Small and Medium Enterprises

Hanin Alqam - Sultan Qaboos University, Seeb, Muscat, 132, Sultanate of Oman
Mohammad Razzak - Sultan Qaboos University, Seeb, Muscat, 132, Sultanate of Oman
Adil Al-Busaidi - Sultan Qaboos University, Seeb, Muscat, 132, Sultanate of Oman
Said Al-Riyami - Sultan Qaboos University, Seeb, Muscat, 132, Sultanate of Oman


Citation Format:



DOI: http://dx.doi.org/10.62527/joiv.8.2.2230

Abstract


The drivers of digitalization and small and medium enterprises (SMEs) performance have been primarily examined through resource-based theories. Hence, this study presents an alternative perspective based on such organizations' readiness and dynamic capabilities through a conceptual framework. A conceptual framework is developed by drawing upon the digital readiness theory (DRT) along with the dynamic capabilities view (DCV) to propose an integrated framework that posits a set of propositions linking constructs that reflect both digital readiness as well as the dynamic capabilities of an organization as possible drivers of business process digitalization (BPD) and performance. The empirical literature based on the DRT suggests that digital readiness will likely drive BPD and performance. Whereas leveraging the premise of the DCV indicates that the ability to sense opportunities and threats is reflected by strategic foresight. In contrast, the ability to seize and transform is reflected through strategic flexibility. The propositions posit that all three factors influence performance directly and through the mediating effect of BPD. The framework developed in this study may provide clues to practitioners and policymakers related to SME development regarding potential drivers of digitalization and performance. Growing scholarly publications on antecedents of digitalization and the performance of SMEs have focused primarily on resources. The current study offers an alternate perspective by integrating the two theories based on such organizations' readiness and dynamic capabilities.  

 


Keywords


Digitalization; performance; digital readiness; strategic foresight; strategic flexibility; small and medium enterprises; SME

Full Text:

PDF

References


Rehman, F.U. and Prokop, V. (2023). Interplay in management practices, innovation, business environment, degree of competition and environmental policies: a comparative study. Business Process Management Journal, Vol. 29 No. 3, pp. 858-892

Razzak, M.R., Al-Riyami, S. and Palalic, R. (2022). Organizational Meta Capabilities in the Digital Transformation Era. Foresight and STI Governance, 16(4), pp.24-31

Prabhudesai, R., Pangarkar, N. and Prasad, C.V. (2022). Resource type and SME alliance formation: the contingent role of perceived environmental uncertainty. Journal of Small Business and Enterprise Development, Vol. 29 No. 7, pp. 10711088.

Low, M.P., Seah, C.S., Cham, T.-H. and Teoh, S.H. (2022), "Digitalization adoption for digital economy: an examination of Malaysian small medium-sized enterprises through the technology–organization– environment framework", Business Process Management Journal, Vol. 28 No. 7, pp. 1473-1494. [5]. Morris, J., Morris, W. and Bowen, R. (2022). Implications of the digital divide on rural SME resilience. Journal of Rural Studies, 89, pp.369-377.

Jassem, S. and Razzak, M.R. (2021). Industry 4.0: The Future of Manufacturing—Foundational Technologies, Adoption Challenges, and Future Research Directions. Fourth Industrial Revolution and Business Dynamics: Issues and Implications, pp.127-158.

Battistoni, E., Gitto, S., Murgia, G. and Campisi, D. (2023). Adoption paths of digital transformation in manufacturing SME. International Journal of Production Economics, 255, p.108-122.

Ramasamy, P. and Sampath, V. (2023). Technology readiness of micro, small and medium enterprises. World Review of Entrepreneurship, Management and Sustainable Development, 19(1-2), pp.121-135.

Akenroye, T.O., Owens, J.D., Elbaz, J. and Durowoju, O.A. (2020). Dynamic capabilities for SME participation in public procurement. Business Process management Journal, Vol. 26 No. 4, pp. 857888.

Verhoef, P.C., Broekhuizen, T., Bart, Y., Bhattacharya, A., Dong, J.Q., Fabian, N. and Haenlein, M. (2021). Digital transformation: A multidisciplinary reflection and research agenda. Journal of business research, 122, pp.889-901.

Kraus, S., Roig-Tierno, N. and Bouncken, R.B. (2019). Digital innovation and venturing: An introduction into the digitalization of entrepreneurship. Review of Managerial Science, 13(3), pp.519-528.

Broo, D.G. and Schooling, J. (2023). Digital twins in infrastructure: definitions, current practices, challenges and strategies. International Journal of Construction Management, 23(7), pp.1254-1263.

Seo, J., Lee, B.K. and Jeon, Y. (2023), "Digitalization strategies and evaluation of maritime container supply chains", Business Process Management Journal, Vol. 29 No. 1, pp. 1-21.

Kraus, S., Jones, P., Kailer, N., Weinmann, A., ChaparroBanegas, N. and Roig-Tierno, N. (2021). Digital transformation: An overview of the current state of the art of research. Sage Open, 11(3), p.21582440211047576.

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of management, 17(1), pp.99-120.

Annarelli, A., Battistella, C., Nonino, F., Parida, V. and Pessot, E. (2021). Literature review on digitalization capabilities: Cocitation analysis of antecedents, conceptualization, and consequences. Technological Forecasting and Social Change, 166, pp. 120-133.

Teece, D.J., Pisano, G. and Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), pp.509-533.

Uddin, Md. H., Razzak, M.R., & Azmawani, A.R. (2023). Sustainable supply chain management practices, dynamic capabilities, and competitive advantage: Evidence from Bangladesh ready-made garments industry. Business Strategy & Development, Vol. 6, No. 2, pp. 176-188.

Teece, D.J. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), pp.40-49

Razzak, M.R. (2023). Mediating effect of productivity between sustainable supply chain management practices and competitive advantage: Evidence from apparel manufacturing in Bangladesh. Management of Environmental Quality, Vol. 34, No. 2, pp.428445.

Soomro, K.A., Kale, U., Curtis, R., Akcaoglu, M. and Bernstein, M. (2020). Digital divide among higher education faculty. International Journal of Educational Technology in Higher Education, 17, pp.1-16.

Luu, T.D. (2023), "Digital transformation and export performance: a process mechanism of firm digital capabilities", Business Process Management Journal, Vol. ahead-of-print No. ahead-of-print.

Nasution, M.I., Fahmi, M. and Prayogi, M.A. (2020, March). The quality of small and medium enterprises performance using the structural equation model-part least square (SEM-PLS). In Journal of Physics: Conference Series (Vol. 1477, No. 5, p. 052052). IOP Publishing.

. Ardito, L., Galati, F., Messeni Petruzzelli, A. and Corvino, A. (2020). Improving the financial performance of SMEs: The presence in foreign markets and the moderating role of corporate group and alliance portfolio size. Business Process Management Journal, Vol. 26 No. 5, pp. 1041-1054.

Dutta, P., Choi, T.M., Somani, S. and Butala, R. (2020). Blockchain technology in supply chain operations: Applications, challenges and research opportunities. Transportation research part e: Logistics and transportation review, 142, p.107-119.

Kuusisto, M. (2017), “Organizational effects of digitalization: A literature review”, International Journal of Organization Theory and Behavior, Vol. 20 No. 03, pp. 341–362.

Luo, Y. (2021). New OLI advantages in digital globalization. International Business Review, 30(2), pp.117-131.

Omrani, N., Rejeb, N., Maalaoui, A., Dabić, M. and Kraus, S. (2022). Drivers of Digital Transformation in SMEs. IEEE Transactions on Engineering Management, Vol. (ahead-of-print).

Bertoni, F., Bonini, S., Capizzi, V., Colombo, M.G. and Manigart, S., 2022. Digitization in the market for entrepreneurial finance: Innovative business models and new financing channels. Entrepreneurship Theory and Practice, 46(5), pp.1120-1135.

Monaghan, S., Tippmann, E. and Coviello, N. (2020). Born digitals: Thoughts on their internationalization and a research agenda. Journal of International Business Studies, 51, pp.11-22.

Palumbo, R. (2022). Does digitizing involve desensitizing? Strategic insights into the side effects of workplace digitization. Public Management Review, 24(7), pp.975-1000.

Kohnke, O. (2017). It’s not just about technology: The people side of digitization. Shaping the digital enterprise: Trends and use cases in digital innovation and transformation, pp.69-91.

Plesner, U., Justesen, L. and Glerup, C. (2018). The transformation of work in digitized public sector organizations. Journal of Organizational Change Management, Vol. 31 No. 5, pp. 1176-1190.

Vendrell-Herrero, F., Bustinza, O.F., Parry, G. and Georgantzis, N. (2017). Servitization, digitization and supply chain interdependency. Industrial Marketing Management, 60, pp.69-81.

Luz Martín‐Peña, M., Díaz‐Garrido, E. and SánchezLópez, J.M. (2018). The digitalization and servitization of manufacturing: A review on digital business models. Strategic Change, 27(2), pp.91-99.

Kim, S., Choi, B. and Lew, Y.K. (2021). Where is the age of digitalization heading? The meaning, characteristics, and implications of contemporary digital transformation. Sustainability, 13(16), p.8909.

Holotiuk, F. and Beimborn, D. (2017). Critical success factors of digital business strategy. Wirtschaftsinformatik 2017 Conference Proceedings.

Legner, C., Eymann, T., Hess, T., Matt, C., Böhmann, T., Drews, P., Mädche, A., Urbach, N. and Ahlemann, F. (2017). Digitalization: opportunity and challenge for the business and information systems engineering community. Business & Information Systems Engineering, 59, pp.301-308.

Mithas, S., Tafti, A. and Mitchell, W. (2013). How a firm's competitive environment and digital strategic posture influence digital business strategy. MIS quarterly, pp.511-536.

Imgrund, F., Fischer, M., Janiesch, C. and Winkelmann, A. (2018). Approaching digitalization with business process management. Proceedings of the MKWI, pp.1725-1736.

Singh, A. and Hess, T. (2017). How chief digital officers promote the digital transformation of their companies. MIS Quarterly Executive, 16(1).

Eller, R., Alford, P., Kallmünzer, A. and Peters, M. (2020). Antecedents, consequences, and challenges of small and medium sized enterprise digitalization. Journal of Business Research, 112, pp.119-127.

Gupta, M. (2020) What is Digitization, Digitalization and Digital Transformation? Available at: https://www.arcweb.com/blog/whatdigitizationdigitalization-digitaltransformation#:~:text=critical%20communication%20 skills.,Digitization%20refers%20to%20creating%20a% 20digital%20representation%20of%20physical%20obj ects,business%20transfor mation%20enabled%20by%20digitalization.

Weiner, B.J. (2020). A theory of organizational readiness for change. In Handbook on implementation science (pp. 215-232). Edward Elgar Publishing.

Hussain, M. and Papastathopoulos, A. (2022). Organizational readiness for digital financial innovation and financial resilience. International Journal of Production Economics, 243, pp. 132-148.

Lokuge, S., Sedera, D., Grover, V. and Dongming, X. (2019). Organizational readiness for digital innovation: Development and empirical calibration of a construct. Information & management, 56(3), pp.445-461.

Mikalef, P. and Krogstie, J. (2020). Examining the interplay between big data analytics and contextual factors in driving process innovation capabilities. European Journal of Information Systems, 29(3), pp.260-287.

Xie, X., Zhang, H. and Blanco, C. (2022). How organizational readiness for digital innovation shapes digital business model innovation in family businesses. International Journal of Entrepreneurial Behavior & Research, (ahead-of-print).

. Alzhanova, F.G., Kireyeva, A.A., Satpayeva, Z.Т. and Nurbatsin, A. (2020). Analysis of the level of technological development and digital readiness of scientific-research institutes. The Journal of Asian Finance, Economics and Business (JAFEB), 7(12), pp.1133-1147.

Talafidaryani, M. (2021). A text mining-based review of the literature on dynamic capabilities perspective in information systems research. Management Research Review, 44(2), pp.236267.

Hall, S., Workman, M., Hardy, J., Mazur, C., Anable, J., Powell, M. and Wagner, S.M. (2022). Doing business model innovation for sustainability transitions—Bringing in strategic foresight and human centred design. Energy Research & Social Science, 90, p.685-699.

Klakurka, J.A. and Irwin, B. (2016). Foresight: A new paradigm in organizational strategy. Proceedings of IMCIC-ICSIT.

Pierenkemper, C. and Gausemeier, J. (2021). Developing strategies for digital transformation in smes with maturity models. In Digitalization: Approaches, Case Studies, and Tools for Strategy, Transformation and Implementation (pp. 103-124). Cham: Springer International Publishing.

AlMujaini, H., Hilmi, M., Abudaqa, A. and Alzahmi, R. (2021). Corporate foresight organizational learning and performance: The moderating role of digital transformation and mediating role of innovativeness in SMEs. International Journal of Data and Network Science, 5(4), pp.703-712.

Mahmoud, M.A., Blankson, C., Owusu-Frimpong, N., Nwankwo, S. and Trang, T.P. (2016). Market orientation, learning orientation and business performance: The mediating role of innovation. International Journal of Bank Marketing. Vol. 34 No. 5, pp. 623648.

Sony, M., Antony, J. and Mc Dermott, O. (2022). How do the technological capability and strategic flexibility of an organization impact its successful implementation of Industry 4.0? A qualitative viewpoint. Benchmarking: An International Journal, (ahead-of-print).

Xiao, H., Yang, Z. and Hu, Y. (2021). Influencing mechanism of strategic flexibility on corporate performance: the mediating role of business model innovation. Asia Pacific Business Review, 27(3), pp.470-492.

. Jassem, S. and Razzak, M.R. (2020). Entrepreneurship in Urban Jungles through High-Tech Vertical Farming. In: Entrepreneurship-Contemporary Issues. IntechOpen.

Fachrunnisa, O., Adhiatma, A., Lukman, N. and Ab Majid, M.N. (2020). Towards SMEs’ digital transformation: The role of agile leadership and strategic flexibility an empirical study from Indonesia and Malaysia. Journal of Small Business Strategy, 30(3), pp.01-21.

Celuch, K. and Murphy, G. (2010). SME Internet use and strategic flexibility: the moderating effect of IT market orientation. Journal of Marketing Management, 26(1-2), pp.131-145.

Denner, M.S., Püschel, L.C. and Röglinger, M. (2018). How to exploit the digitalization potential of business processes. Business & Information Systems Engineering, 60, pp.331-349.

Li, J., Merenda, M. and Venkatachalam, A.R. (2009). Business process digitalization and new product development: An empirical study of small and mediumsized manufacturers. International Journal of E-Business Research (IJEBR), 5(1), pp.49-64.

Looy, A. (2021). A quantitative and qualitative study of the link between business process management and digital innovation. Information & Management, 58(2), p.103413.

Kirchmer, M., Franz, P., Lotterer, A., Antonucci, Y. and Laengle, S. (2016). The value-switch for digitalization initiatives: business process management. BPM-D Whitepaper, Philadelphia, London.

Ribeiro-Navarrete, S., Botella-Carrubi, D., Palacios-Marqués, D. and Orero-Blat, M (2021). The effect of digitalization on business performance: An applied study of KIBS. Journal of Business Research, 126, pp.319-326.

Wamba, S.F. (2022). Impact of artificial intelligence assimilation on firm performance: The mediating effects of organizational agility and customer agility. International Journal of Information Management, 67, p.102544.

Chaithanapat, P., Punnakitikashem, P., Oo, N.C.K.K. and Rakthin, S. (2022). Relationships among knowledge-oriented leadership, customer knowledge management, innovation quality and firm performance in SMEs. Journal of Innovation & Knowledge, 7(1), p.100-122.

Ritter, T. and Pedersen, C.L. (2020). Digitization capability and the digitalization of business models in business-to-business firms: Past, present, and future. Industrial Marketing Management, 86, pp.180-190.

Bouwman, H., Nikou, S. and de Reuver, M. (2019). Digitalization, business models, and SMEs: How do business model innovation practices improve performance of digitalizing SMEs? Telecommunications Policy, 43(9), pp.101-127.

Razzak, M.R., Jassem, S., Akter, A. and Mamun, S.A.A. (2021). Family commitment and performance in private family firms: moderating effect of professionalization. Journal of Small Business and Enterprise Development, 28(5), pp.669-689.

Vanpoucke, E., Vereecke, A. and Wetzels, M. (2014). Developing supplier integration capabilities for sustainable competitive advantage: A dynamic capabilities approach. Journal of Operations Management, 32(7-8), pp.446-461.

Gill, P. and France, T. (2019). Accelerating diverse leader readiness through foresight and futures thinking. Futures Thinking and Organizational Policy: Case Studies for Managing Rapid Change in Technology, Globalization and Workforce Diversity, pp.327-345.

. Gfrerer, A., Hutter, K., Füller, J. and Ströhle, T. (2021). Ready or not: Managers’ and employees’ different perceptions of digital readiness. California Management Review, 63(2), pp.23-48.

Nasution, R.A., Rusnandi, L.S.L., Qodariah, E., Arnita, D. and Windasari, N.A. (2018). The evaluation of digital readiness concept: existing models and future directions. The Asian Journal of Technology Management, 11(2), pp.94-117.

Lassnig, M., Müller, J.M., Klieber, K., Zeisler, A. and Schirl, M. (2022). A digital readiness check for the evaluation of supply chain aspects and company size for Industry 4.0. Journal of Manufacturing Technology Management, 33(9), pp.1-18.

Baier, M.S., Lockl, J., Röglinger, M. and Weidlich, R. (2022). Success factors of process digitalization projects–insights from an exploratory study. Business Process Management Journal, Vol. 28, No. 2, pp.325347.

. Khan, F., Amyotte, P. and Adedigba, S. (2021). Process safety concerns in process system digitalization. Education for Chemical Engineers, 34, pp.33-46.

Michel, S., Bootz, J.P. and Bessouat, J. (2022). Possible futures of crowd logistics for manufacturers: results of a strategic foresight study. Journal of Business & Industrial Marketing, Vol. (ahead-of-print).

Favoretto, C., Mendes, G.H.D.S., Filho, M.G., Gouvea de Oliveira, M. and Ganga, G.M.D. (2022). Digital transformation of business model in manufacturing companies: challenges and research agenda. Journal of Business & Industrial Marketing, 37(4), pp.748-767.

Brozović, D., Jansson, C., & Boers, B. (2023). Strategic flexibility and growth of small and mediumsized enterprises: a study of enablers and barriers. Management Decision.

Matalamki, M.J. and Joensuu-Salo, S. (2022). Digitalization and strategic flexibility–a recipe for business growth. Journal of Small Business and Enterprise Development, 29(3), pp.380-401.

Hilmiana, H., Tisnawati, E., Muizu, W.O.Z., Sartika, D., Kamal, I. and Ihsan, M.C. (2022) Strategies for Increasing the Digital Readiness of West Java's Small and Medium Enterprises in the Digital Era Using Digital Readiness Index Model. Available at SSRN 4065012.

Sarpong, D. and Meissner, D. (2018). Special issue on ‘corporate foresight and innovation management’. Technology Analysis & Strategic Management, 30(6), pp.625-632.

Asmai, S.A., Almansoori, B.S.A. and Kamalrudin, M. (2022). Mediation Model of Strategic Foresight Influencing Dynamic Capability. International Journal of Sustainable Construction Engineering and Technology, 13(2), pp.120-133.

Luz Martín‐Peña, M., Díaz‐Garrido, E., & Sánchez‐López, J. M. (2018). The digitalization and servitization of manufacturing: A review on digital business models. Strategic Change, 27(2), 91-99.

Zhu, S., Dong, T., & Luo, X. (2021). A longitudinal study of the actual value of big data and analytics: The role of industry environment. International Journal of Information Management, 60, Article 102389.

Zhou, L., Huang, H., Chen, X., Tian, F. (2022) Functional diversity of top management teams and firm performance in SMEs: a social network perspective. Review of Managerial Science. https://doi.org/10.1007/s11846-022-00524-w

Kim, J., Xiang, J., & Lee, S. (2009). The impact of IT investment on firm performance in China: An empirical investigation of the Chinese electronics industry. Technological Forecasting and Social Change, 76(5), 678–687

Wu, J., Kao, Y., & Sambamurthy, V. (2016). The integration effort and E-health compatibility effect and the mediating role of E-health synergy on hospital performance. International Journal of Information Management, 36(6, Part B), 1288–1300

Dubey, R., Gunasekaran, A., Childe, S. J., Bryde, D. J., Giannakis, M., Foropon, C., Roubaud, D., & Hazen, B. T. (2020). Big data analytics and artificial intelligence pathway to operational performance under the effects of entrepreneurial orientation and environmental dynamism: A study of manufacturing organisations. International Journal of Production Economics, 226, Article 107599.

Wamba, L., Fosso Wamba, S., Kala Kamdjoug, J., & Tchatchouang Wanko, C. (2020). Influence of artificial intelligence (AI) on firm performance: The business value of AIbased transformation projects. Business Process Management Journal, 26(7), 1893–1924

Rammer, C., Fernandez, ´ G. P., & Czarnitzki, D. (2022). Artificial intelligence and industrial innovation: Evidence from German firm-level data. Research Policy, 51(7), Article 104555

Zhen, Z., Yousaf, Z., Radulescu, M., & Yasir, M. (2022). Nexus of Digital Organizational Culture, Capabilities, Organizational Readiness and Innovation: Investigation of SMEs Operating in the Digital Economy. Sustainability, Vol. 13, No. 2, pp. 720-737.

Jones, P. (2017). The future of Canadian governance: Foresight competencies for public adminsitration in the digital era. Canadian Public Adminstration, Vol. 60, No. 4, pp. 657-681

Streit, J.M., Felknor, S.A., Edwards, N.T., & Howard, J. (2021). Leveraging Strategic Foresight to Advance Worker Safety, Health, and Well-Being. International Journal of Research in Public Health, No. 18, No. 16, pp. 8477-8499.

Peter, M.K. (2018). The Evolving Approach to Strategic Corporate Foresight at Swiss Bank PostFinance in the Age of Digital Transformation. In: Schreiber, D., Berge, Z. (eds) Futures Thinking and Organizational Policy. Plagrave Macmillan, Cham.