The transformative impact of digital technology on SME performance: a review and framework for digital transformation

Abstract

Digital technologies have significantly transformed the competitive environment of small and medium-sized enterprises (SMEs). Yet a comprehensive synthesis of their impact on performance outcomes remains fragmented. Therefore, this study addresses this knowledge gap through an integrative review of the digital transformation of SMEs using a thematic synthesis of 94 documents from various databases and international organizations published between 2010–2025. The findings indicate that most studies corroborate that digital transformation enhances operational efficiency and expands market reach, while also highlighting substantial challenges for many SMEs arising from resource constraints. Additionally, the findings identify other less-examined variables, such as organizational culture and regulatory environment, that can act as moderating variables in the relationship between digital transformation and SMEs’ performance outcomes. A consolidated framework synthesizes the findings into an integrated framework that can be used as a basis for both theoretical development and practical application by policymakers, researchers, and practitioners working with SMEs. In addition to synthesizing existing fragmented research streams, this study strengthens the understanding of the role of digital transformation in driving SME outcomes and provides practical guidance for increasing resilience and improving competitiveness in the digital economy. This study underscores the necessity of contextualized strategies to maximize the opportunities presented by digital transformation and mitigate associated risks.