The Impact of Digital Transformation on Financial Outcomes in Malaysian Small and Medium Enterprises

Abstract

This paper explores the impact of digital transformation on the financial performance of Small and Medium Enterprises (SMEs) in Malaysia, emphasizing its critical role in enhancing profitability, revenue growth, and operational efficiency. By integrating theories such as the Resource-Based View and Dynamic Capabilities Theory, the study presents a model illustrating how digital adoption and strategic alignment drive financial outcomes in SMEs. The research highlights the challenges Malaysian SMEs face, including financial constraints, digital skills gaps, and inadequate infrastructure, while also discussing the opportunities digital transformation offers in the context of Malaysia’s broader digital economy goals. The findings underscore the importance of supportive government policies and targeted strategies to ensure SMEs can fully leverage digital transformation, contributing to national economic growth and competitiveness.