From Digital Transformation to Sustained Competitive Advantage: How Strategic Orientation, Technology Sophistication, and Adaptive Capability Drive Operational Efficiency

This study examines the impact of digital transformation on the operational efficiency and sustained competitive advantage of SMEs in the context of a developing country. Rather than analyzing digitalization in isolation, this research integrates three key dimensions - digital strategic orientation, digital adaptive capability, and digital technology sophis-tication - into a comprehensive framework offering a holistic perspective on the effects of digital transformation in SMEs. Based on a survey of 216 Turkish SMEs, this research employs structural equation modeling using Smart PLS to assess the relationships be-tween these digital transformation dimensions and firm performance. The findings reveal that all three sub-categories of digital transformation positively influence operational efficiency. Furthermore, operational efficiency positively impacts sustained competitive advantage highlighting the transformative role of digital transformation in sustaining SME competitiveness. This multi-dimensional approach provides a comprehensive view of how digital transformation enhances SME efficiency beyond simple technology adoption. The study advances our theoretical understanding by demonstrating that digital transformation requires digital strategy integration into corporate strategy, awareness of emerging digital technologies, and the development of digital adaptive capabilities to drive SME performance. The findings suggest that SMEs should embed digitalization into daily business and e-commerce operations, enhance their capacity to adopt digital tools, and invest in technological infrastructure to achieve sustained competitiveness.