Drivers of Digital Maturity in Emerging Markets: How Leadership and Innovation Shape SME Transformation

Abstract

This study investigates how transformational leadership influences digital transformation (DT) in small and medium-sized enterprises (SMEs), with innovation acting as a mediating capability. Drawing on the Resource-Based View and Dynamic Capabilities Theory, we test a process-based model using survey data from 300 Vietnamese SMEs. Partial least squares structural equation modeling (PLS-SEM) confirms that leadership significantly predicts innovation (β = 0.582, p < .001), which in turn mediates its effect on digital maturity (indirect β = 0.244, p < .001). Complementary machine learning models (XGBoost R² = 0.772; RMSE = 0.597) identify innovation and leadership as the most influential predictors. These findings contribute theoretically by integrating RBV and DCT through a validated mediation mechanism and empirically by demonstrating the dual value of explanatory and predictive analytics. Practical implications call for SME leaders to foster innovation ecosystems and for policymakers to support leadership development as a strategic DT lever in emerging markets.