The effect of digitally-driven business model innovation on business performance

Abstract

Research shows that business model innovation (BMI) through digital transformation offers small and medium-sized enterprises (SMEs) an opportunity to engage and adopt digital technologies, as it positively influences business performance. This study is one of the first to test the effect of three moderators, business culture renewal, organisational structure, and strategic renewal, on the relationship between BMI through digital transformation and business performance. An empirical study was conducted on 198 South African and 226 Dutch SMEs to achieve this. The Exploratory factor analysis, regression analysis, and correlation analysis findings confirm that BMI through digital transformation positively impacts SMEs’ overall business performance. Moreover, the findings show that when SMEs increase their BMI through digital transformation, business performance will increase if (1) the business successfully implements a flexible organisational structure and (2) renews its strategy. The findings indicate that business culture renewal does not have this same effect. Also, the multivariate analysis of variance shows no significant differences between the business performance of SMEs from the two countries. Managerial implications relate to identifying how SMEs can achieve BMI innovation through digital transformation, which is still lacking. Furthermore, SMEs should adapt their existing organisational structure and strategy to accommodate digital transformation changes.