The Non-Linear Impact of Digitalization on the Performance of SMEs: AHypothesis Test Based on the Digitalization

Paradox

Abstract

While digitalization offers new opportunities for small- and medium-sized enterprises (SMEs), it also introducesthephenomenonofthe"digitalizationparadox". This paper developsatheoretical model comprisingdigitalization, digital technology-business alignment, external social capital, andSMEs'performance, rooted in strategic alignment theory (SAT) and social capital theory (SCT).Thenecessary data forthestudy were obtained by distributing questionnaires to 352 small and medium-sized enterprises engaged in digital practices in China, and hierarchical regression analysis was employed to investigatetheimpactofdigitalizationontheperformanceofSMEsand its boundariesofinfluence.Theresults indicate an inverted U-shaped relationship betweendigitalizationand SMEperformance, with both digital technology-business alignment and external social capital serving as positive moderators. Specifically, digital technology-business alignment and external social capital both enhancethepositiveimpactofdigitalizationontheperformanceofSMEsand mitigate its negative effects.Thefindings enhance comprehensionofthe"digitalizationparadox" and offer new insights and solutions forSMEsto navigatetheopportunities and challengesofdigitalization.

Keywords

digitalizationSMEs'performancedigital technology-business alignmentexternal social capital