Individual absorptive capacity as a stepping stone for digitalization, digital transformation, and small business performance; Entrepreneurial perspectives

Abstract

This study aims to disclose the role of individual absorptive capacity on small business digital transformation and its impact on business performance. The research method used is the explanatory survey. The research was carried out on small businesses in Bandung City, Indonesia. A sample of 334 small entrepreneurs was taken by purposive sampling.  Data were processed using descriptive statistics and multiple regression. The study found that individual absorptive capacity affects small businesses' digitalization and digital transformation. Simultaneously, individual absorptive capacity, digitalization, and digital transformation strongly affect small business performance. For companies that do digitalization and digital transformation, performance will improve. However, the effect of individual absorptive capacity on business performance is partially negative. It means the individual absorptive capacity does not directly influence business performance, but does have an impact when mediated by other variables such as digitalization and digital transformation. Thus, this research demonstrates that absorptive capacity is a crucial variable determining other factors.