Impact of digitalization on small and medium enterprises performance in Sri Lanka

Abstract

The impact of digitalization has been an issue that is gaining ground, giving rise to concerns and alarm within the Small and Medium Enterprises (SMEs) in Sri Lanka. The objective of this research lies in showcasing the effects of digitalization on SME performance in Sri Lanka. The study is carried out in positivism philosophy where deduction approach is used.The approach adopted in this study is a questionnaire and data are collected using structured questionnaires through quota sampling technique. SPSS software is then used to analyze the collected data since its primary statistical technique is multiple regression analysis. The important outcomes of this study reveal intriguing revelations. It is observed that poor fit has a negative relationship with the performance of business while cost-effectiveness, trust, innovation and agility show a positive and significant relationship to SME’s performance. However, interactivity and digital skills and capabilities do not necessarily imply unambiguous power. Digitalization is one of the major factors that determine SMEs’ performance in Sri Lanka. SMEs should pay close attention to cost effectiveness, trust, innovation and responsiveness using digitalization based on the results. The null hypotheses for incompatibility, interactivity, and digital skills and capabilities are insignificant means that they could be investigated further, or perhaps alternative methods of intervention may be necessary. The findings of this study present the focal opportunities and threats which digitalization presents for policymakers in Sri Lanka who are planning to design policies that can capture digitalization benefits to improve business performance.