Influence of Digital Transformation Capabilities on Sustainable Competitive Advantage Among SMEs In Kwara State

Abstract

In resource- and infrastructure-constrained developing economies, digital transformation has emerged as a key driver of SME competitiveness advantage. This paper examines the influence of digital transformation capabilities on sustainable competitive advantage for SMEs in Kwara State, Nigeria, drawing on diffusion of innovation theory and the resource-based view. In particular, the paper explores how digital infrastructure capabilities affect customer loyalty and retention, and the role of digital capabilities in sustainable, innovative performance. A cross-sectional survey design was used, and 360 SME owners and managers were surveyed using a structured questionnaire. The study hypotheses were tested using descriptive statistics and inferential analysis. The results indicate that the impact of digital infrastructure capability on customer loyalty and customer retention is positive and statistically significant, but of low intensity, suggesting that digital infrastructure could be perceived as an enabling environment for customer outcomes. On the contrary, digital skills have a strong and significant effect on sustainable innovation performance, explaining a high percentage of the variation in innovation sustainability in SMEs. The discoveries were used to emphasise that digital infrastructure is required, but the critical factor in determining the extent to which digital resources are converted into long-term competitive advantage and sustained innovation is the development of digital skills among owners and employees. However, the owners and managers of SMEs are advised to be more strategic in their digital transformation practices by moving beyond the acquisition of basic digital infrastructure to the systematic development of digital capabilities within their firms.