Analyzing the Barriers and Facilitators of Technology Adoption in Traditional SMEs Transitioning to Digital Business Models

Abstract

Small and medium-sized enterprises (SMEs), which have traditionally operated their businesses, are under increasing pressure to shift from old and conventional practices to more digital ways of doing business because of digital disruptions. Despite awareness about the potential advantages of such changes within organizations, the adoption of technologies by many traditional SMEs remains difficult because of inertia, inadequate digital skills, and poor supporting ecosystems. The purpose of this research is to explore the factors that hinder and promote the adoption of technologies by traditional SMEs during the process of digital business model change. An empirical explanatory mixed-method design has been adopted by using data from 250 SMEs that are traditional and engaged in manufacturing and retail industries and have a history of operations of a minimum of 15 years. The quantitative data have been analyzed through the use of regression and mediation analysis and supplemented with qualitative insights from interviews regarding the implementation experience. According to the results, internal barriers are more significant in the process of digital transformation than external barriers. Resistance to change (mean = 4.32), inertia of leadership (4.18), and lack of digital competencies (4.05) are the key barriers. Resistance to change explains 29.4% of the variation in adoption speed (β = -0.542, p < 0.001). From the viewpoint of the facilitator, the effectiveness of external barriers, such as government subsidies and vendor ecosystem, was observed to work only via the mediator barrier of internal workforce readiness. The companies that have digitally structured training programs experienced a 34% faster adoption speed than others. Highly ready SMEs generated 28.6% more digital revenue and were 41% more operationally agile than less ready firms. There is a huge gap in the outcomes of digital transformation between the companies having the same technologies, which can be explained only by the readiness of these organizations. Thus, the study confirmed that the digital transformation of SMEs does not depend on technology acquisition but on the ability of the organization to use these technologies, its cultural alignment, and the digital literacy of the employees. Contribution to the TOE framework includes emphasizing internal readiness as an important factor of successful digital transformation.