Human Capital Capability and Digital Transformation in Enhancing SME Performance: A System Thinking Perspective

Information from the abstract

Small and medium enterprises (SMEs) are under pressure to use digital technology while continuing to improve their business performance. In practice, however, buying technology does not automatically make an SME more productive. Employees still need the knowledge, skills, learning capacity, and ability to adapt that allow technology to be used well. This study develops a system-thinking framework explaining how human capital capability and digital transformation can work together to improve SME performance. A systematic literature review was combined with system-thinking analysis. Recent studies on human capital, digital capability, digital transformation, dynamic capabilities, organizational learning, innovation, and SME performance were reviewed and synthesized. The review shows that human capability is not a supporting issue outside digital transformation; it is part of the transformation itself. Human capital strengthens digital capability, digital capability supports digital transformation, and digital transformation creates opportunities for learning, innovation, and organizational adaptation. Better performance can then provide resources for further investment in people and technology. The study presents a reinforcing loop and a balancing loop that explain why digital transformation may accelerate when capability and resources grow together, but may slow down when the digital skill gap becomes too large.

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Related topics: Digital Transformation in Industry · Educational Leadership and Innovation · Organizational and Employee Performance