Development of Digital Capabilities in Small Business: A Necessary Condition Analysis

Abstract

Digital transformation is a relevant topic in business, particularly for small and medium-sized enterprises (SMEs). As technology continues to evolve, it becomes increasingly important for SMEs to develop their digital capabilities to compete in the market and remain relevant. However, the relationship between digital capabilities in SMEs remains unclear. This paper aims to explore whether certain capabilities of the digital growth process are prerequisites for others to exist. To achieve this objective, we analyze the four steps of the DIGIGROW framework: Sensing, Developing, Seizing, and Managing. Our findings demonstrate that Sensing is a prerequisite for Developing and that both Developing and Managing are prerequisites for Seizing. We also demonstrate that Developing constraints is a component of the capability of Managing. Our contributions provide insights into the strategic management literature, specifically by improving our understanding of the relationships between digital capabilities within a firm. From a practical perspective, this study suggests that companies should holistically focus on the different capabilities involved in the digital growth process and allocate resources to improve the preconditions associated with each capacity. Finally, we demonstrate that Necessary Condition Analysis (NCA) can be a useful tool for future research in the field of digital growth.