Digital Transformation and Business Model Innovation in European SMEs: A Dynamic Capabilities Perspective

Abstract

This research investigates the complex interplay between digital transformation and business model innovation within European small and medium-sized enterprises (SMEs) through the theoretical lens of the dynamic capabilities framework. In an increasingly volatile global market, the imperative for SMEs to integrate advanced digital technologies has become paramount for sustained survival and growth. By systematically examining how these enterprises adapt to rapid technological disruptions and strategically leverage digital tools to fundamentally innovate their existing business models, this study identifies the critical key enablers and structural barriers to successful organizational transformation. A robust mixed-methods approach, combining in-depth qualitative interviews with industry leaders and rigorous quantitative analysis of survey data from a diverse cross-section of European firms, is meticulously employed to provide a comprehensive, multi-dimensional understanding of the phenomenon. The empirical results highlight that dynamic capabilities—specifically sensing, seizing, and transforming—are indispensable for navigating the complexities of digital integration. Furthermore, the research reveals that resource constraints and organizational inertia frequently impede progress, whereas agile leadership and a culture of continuous learning significantly accelerate digital maturity. Ultimately, the findings contribute substantially to the growing academic discourse on digital transformation and strategic management. The study offers highly actionable insights and practical frameworks for SME managers, stakeholders, and regional policymakers who are actively aiming to foster sustainable innovation, enhance operational resilience, and drive long-term economic competitiveness in the modern digital era.