The Role of Digital Innovation Capabilities and Organizational Performance of Small and Medium-Sized Enterprise (SMEs) in Sarawak. The Moderating Role of Industry Dynamism
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Universiti Malaysia Sarawak (UNIMAS)
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In today’s highly competitive and rapidly evolving market, Small and Medium Enterprises (SMEs) must leverage digital capabilities and strategic support to sustain performance and remain relevant. This study specifically examines the impact of digital innovation capabilities, such as technology readiness, ICT capabilities, AI-assisted marketing, and government intervention on the organizational performance of SMEs in Sarawak. Based on Resource Based View (RBV) and Dynamic Capability View (DCV), this study also investigates the moderating role of industry dynamism in shaping these relationships. Data were collected through a structured survey targeting middle and top management employees from SMEs in the manufacturing and service sectors across Sarawak. The analysis revealed that technology readiness, AI-assisted marketing, and government intervention significantly enhance organizational performance, while ICT capabilities showed a significant but negative relationship. Surprisingly, industry dynamism only significantly moderated the relationship between government intervention and organizational performance, but the effect was negative. These findings contribute to the RBV and DCV literature by offering insights into how strategic alignment between digital tools, environmental conditions, and institutional support influences SME performance in Sarawak. The study also provides practical recommendations for SME leaders and policymakers to strengthen digital transformation efforts and improve policy responsiveness in dynamic environments.