The Effect of Digitally-Driven Business Model Innovation On Business Performance

Journal of Small Business & Entrepreneurship
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The effect of digitally-driven business model

innovation on business performance
Chanté van Tonder, Bart Bossink, Chris Schachtebeck & Cecile

Nieuwenhuizen
To cite this article: Chanté van Tonder, Bart Bossink, Chris Schachtebeck & Cecile
Nieuwenhuizen (01 Aug 2023): The effect of digitally-driven business model innovation
on business performance, Journal of Small Business & Entrepreneurship, DOI:
10.1080/08276331.2023.2239039
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JOURNAL OF SMALL BUSINESS & ENTREPRENEURSHIP
https://doi.org/10.1080/08276331.2023.2239039
The effect of digitally-driven business model innovation

on business performance
Chante van Tondera, Bart Bossinkb, Chris Schachtebecka and
Cecile Nieuwenhuizenc
a
Department of Business Management, University of Johannesburg, Johannesburg, South Africa;
b
Breakthrough Technology Innovation Group, Vrije Universiteit, Amsterdam, Netherlands; cDHET-NRF
SARChI Entrepreneurship Education, University of Johannesburg, Johannesburg, South Africa
ABSTRACT ARTICLE HISTORY

Research shows that business model innovation (BMI) through Received 18 February 2023
digital transformation offers small and medium-sized enterprises Accepted 18 July 2023
(SMEs) an opportunity to engage and adopt digital technologies,
KEYWORDS
as it positively influences business performance. This study is one
SMEs; digital
of the first to test the effect of three moderators, business culture transformation; business
renewal, organisational structure, and strategic renewal, on the model innovation; business
relationship between BMI through digital transformation and busi- performance
ness performance. An empirical study was conducted on 198
South African and 226 Dutch SMEs to achieve this. The MOTS-CLÉS
Exploratory factor analysis, regression analysis, and correlation PME; transformation
analysis findings confirm that BMI through digital transformation numerique; innovation du
positively impacts SMEs’ overall business performance. Moreover, modele d’entreprise;
performance commerciale
the findings show that when SMEs increase their BMI through
digital transformation, business performance will increase if (1)
the business successfully implements a flexible organisational
structure and (2) renews its strategy. The findings indicate that
business culture renewal does not have this same effect. Also, the
multivariate analysis of variance shows no significant differences
between the business performance of SMEs from the two coun-
tries. Managerial implications relate to identifying how SMEs can
achieve BMI innovation through digital transformation, which is
still lacking. Furthermore, SMEs should adapt their existing organ-
isational structure and strategy to accommodate digital transform-
ation changes.
RÉSUMÉ
La recherche montre que l’innovation du mode le d’entreprise (IME)
par la transformation numerique offre aux petites et moyennes
entreprises (PME) une opportunite de s’engager et d’adopter les
technologies numeriques, etant donne qu’elle a une influence posi-
tive sur la performance de l’entreprise. Cette etude est l’une des
premieres a tester l’effet de trois moderateurs, le renouvellement
de la culture d’entreprise, la structure organisationnelle et le
CONTACT Chante van Tonder chantevt@live.co.za Department of Business Management, University of

Johannesburg, Johannesburg, South Africa.
ß 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives
License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in
any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way. The terms on
which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their
consent.
2 C. VAN TONDER ET AL.
renouvellement strategique, sur la relation entre l’IME par la trans-

formation numerique et la performance de l’entreprise. Pour ce
faire, une etude empirique a ete conduite sur 198 PME sud-afri-
caines et 226 PME neerlandaises. Les resultats de l’analyse factor-
ielle exploratoire, de l’analyse de regression et de l’analyse de
correlation confirment que l’IME, par le biais de la transformation
numerique, a un impact positif sur la performance commerciale
globale des PME. En outre, les resultats montrent que lorsque les
PME augmentent leur IME par le biais de la transformation
numerique, la performance de l’entreprise augmentera si (1) l’entre-
prise met en œuvre avec succes une structure organisationnelle
flexible et (2) renouvelle sa strategie. Les resultats indiquent que le
renouvellement de la culture d’entreprise n’a pas le m^eme effet.
De m^eme, l’analyse multivariee de la variance ne montre pas de
differences significatives entre les performances des deux pays. Les
implications manageriales sont liees a l’identification de la maniere
dont les PME peuvent realiser l’IME par le biais de la transformation
numerique, ce qui fait encore defaut. En outre, les PME devraient
adapter leur structure organisationnelle et leur strategie existantes
pour prendre en compte les changements lies a la transformation
numerique.
1. Introduction
The twenty first century and digital age have brought about many business opportuni-
ties, benefits, challenges, risks, and uncertainty (OECD 2021). The Digital Age, also
called the Fourth Industrial Revolution, is forcing businesses of all sizes and industries
to engage in digital transformation. Digital transformation is a fundamental process
that can impact a business’s strategy, structure, and culture (Matt, Hess, and Benlian
2015) and improve overall business performance (Fitzgerald et al. 2014). Digital trans-
formation is defined by Fitzgerald et al. (2014) as the application of digital technolo-
gies to dramatically improve a business through enhanced customer experience,
streamlining operations, and designing and introducing new business models. A busi-
ness model is defined as the logic of a business that aims to create and capture value
(Zott and Amit 2010). Business model innovation (BMI) is the process of innovating
how value is created and captured. Various authors have indicated that BMI positively
affects business performance (Latifi, Nikou, and Bouwman 2021; Marolt et al. 2018;
Snihur and Bocken 2022). Therefore, businesses should identify the best possible strat-
egies and tools to successfully compete and sustain their position in the dynamic mar-
ket in which they operate by innovating their business models.
Many factors that support digital transformation have been reported in the litera-
ture. For example, Schumacher, Erol, and Sihn (2016) and Majstorovic, Mitrovic, and
Miskovic (2020) reported the need for a strategic roadmap that indicates how a new
business model driven by digital transformation should be adopted. Bharadwaj et al.
(2013) highlight the need for a digital strategy that enables digital resources to create
and capture value. A flexible organisational structure is also needed to ensure that the
business can promptly adapt to dynamic market changes (Fischer et al. 2020).
Alongside the organisational structure and digital strategy is the need to align the
JOURNAL OF SMALL BUSINESS & ENTREPRENEURSHIP 3
organisational culture, which should encourage the adoption and usage of digital
technologies, create a culture of openness towards change, be more risk-oriented and
customer-centric, and focus on employee skills development (Gonzalez-Varona et al.
2020; Westerman et al. 2011). Employees’ buy-in and participation are crucial for
successfully executing and implementing digital transformation (Hartl 2019) because
employees resist change due to the uncertainty it can bring (Darmawan and Azizah
2020; Gupta 2018; Hussain et al. 2018).
This study aims to determine whether business model innovation through digital
transformation positively impacts the performance of small and medium-sized
enterprises (SMEs). More specifically, the study aimed to determine whether strategic
renewal, cultural renewal, and organisational renewal act as moderators to increase
the impact of business model innovation through digital transformation on business
performance.
2. Literature review and hypothesis development

2.1. Digital transformation
Many definitions exist for digital transformation. Most authors agree that digital
transformation involves the adoption of digital technologies (Demirkan, Spohrer, and
Welser 2016; Matt, Hess, and Benlian 2015; Singh and Hess 2020). Hartl and Hess
(2017) define digital transformation as a change process whereby digital technologies
can bring about changes in business models, however, digitalization of products is
not sufficient to enable business improvement. Fitzgerald et al. (2014) argue that
holistic changes are needed, such as changes made to the organisational structure,
culture and processes. Digital transformation disrupts both the industry and society.
These disruptions force businesses to rethink their strategies to respond to them.
Digital transformation enables businesses to adapt or renew their value-creation paths
to sustain their competitive positions (Vial 2021). Reis et al. (2018) claim that busi-
ness managers must adapt their strategies to face digital reality by adopting and inte-
grating digital technologies into their business models. From the literature, we can
see that digital transformation offers several advantages. However, it also presents
challenges whereby businesses are required to rethink their existing business models,
which will require a wide range of capabilities to achieve this successfully. Many
authors (Carcary, Doherty, and Conway 2016; Fitzgerald et al. 2014; Verhoef et al.
2021; Warner and W€ager 2019) have argued that the adoption and use of digital tech-
nologies should be central in business operations, which might require a rethinking
of the strategy and business model to ensure survival and competitive advantage. By
doing so, businesses can expect many advantages, such as improved customer rela-
tionships, streamlined operations, new business models (Fitzgerald et al. 2014),
changes in business culture changes (Warner and W€ager 2019), and improved busi-
ness performance (Ahmad et al. 2021; Saura, Palos-Sanchez, and Cerda Suarez 2017;
Verhoef et al. 2021). The need to engage in digital transformation has become
imperative for businesses; however, businesses need to consider many factors that will
impact the successful implementation of digital transformation.
2.2. Business model innovation and business performance

BMI is defined as the innovative way a business creates value for its customers (Foss
and Saebi 2017). It enables a business to digitally transform its business model,
including innovative changes to products and services, as well as processes such as
customer engagement to enhance and maintain customer relationships. Additionally,
BMI can lead to employee empowerment, resulting in business performance
(Alnajdawi, Emeagwali, and Elrehail 2017). Teece (2010) identifies a business model
as a key driver of business performance. Hartmann, Oriani, and Bateman (2013) con-
clude that BMI positively impacts business performance. In addition, Heij, Volberda,
and Van den Bosch (2014) claim that two types of BMI – business model renewal
and replication – significantly impact business performance. However, it is important
to measure the impact of BMI on business performance through digital transform-
ation (Ahmad et al. 2021; Saura, Palos-Sanchez, and Cerda Suarez 2017; Verhoef
et al. 2021). Several authors have already researched performance measurements and
how they can be measured (Goshu and Kitaw 2017; Kaplan and Norton 1992;
Venkatraman and Ramanujam 1986; Verhoef et al. 2021). Yet, authors do not define
business performance in the same manner. For example, Kaplan and Norton (1992, 5)
uses the balance scorecard to define business performance, stating that ‘a balanced
scorecard is a comprehensive set of performance measures defined from four different
measurement perspectives (financial, customer, internal, and learning and growth) that
provides a framework for translating the business strategy into operational terms’.
Neely, Gregory, and Platts (1995, 81) defines performance as ‘the set of metrics used to
quantify both the efficiency and effectiveness of actions’. Mills, Gerber, and
Terblanche-Smit (2016, 7) agrees, stating that ‘business performance measurement
involves measuring effectiveness and efficiency of organisational strategies and func-
tional operations’. Verhoef et al. (2021) for example state that business performance
should be measured in relation to digitalisation, through for example number of web-
site clicks, video views, number of downloads, but the authors also argue that Return
On Investment (ROI), profitability and growth should also be measured. Dziallas and
Blind (2019) measured innovation through Key Performance Indicators (KPIs) such as
strategy, innovative culture, competence and knowledge, organisational structure,
research, and development activities and financial performance. Teece (2010) argues
that the end goal of new business models is to increase profitability, revenue and
improve the value of the business. Furthermore, digital transformation is associated to
several dimensions of business performance, for example, the level of innovation, finan-
cial performance (e.g. revenue, profitability, growth) and improving competitive advan-
tage, resulting in customer satisfaction. Therefore, this paper classifies business
performance into both operating and financial performance. Operating performance
refers to the penetration rate, speed to the market, customer satisfaction rate, and oper-
ational efficiency, while financial performance refers to the growth in sales volume,
growth in net profit, and market share. Both these operational and financial measures
were used to assess SMEs’ perception regarding their level of satisfaction with their
business performance.
The impact of BMI (Anwar 2018; Latifi, Nikou, and Bouwman 2021; Ramdani,
Binsaif, and Boukrami 2019) and digital transformation (Guo and Xu 2021;
Mubarak et al. 2019; Teng, Wu, and Yang 2022) on business performance have also
been measured. Anwar (2018) reported that BMI positively influences business perform-
ance; in contrast, Latifi, Nikou, and Bouwman (2021) did not find a significant link
between the two. Ramdani, Binsaif, and Boukrami (2019) also found contradictory
results regarding the relationship between BMI and business performance in their litera-
ture study. There are also no conclusive results on the impact of digital transformation
on business performance (Fernandez-Rovira et al. 2021). Mubarak et al. (2019) report
that digital transformation positively impacts business performance, whereas Teng, Wu,
and Yang (2022) note that digital transformation positively impacts operational perform-
ance but not financial performance. Guo and Xu (2021) report similar results. These
findings call for more research to determine whether BMI and digital transformation
positively impact business performance, which this study intended to address.
Our study combines the concepts of BMI and digital transformation, arguing that
a business should redesign its business model by engaging with BMI through the
implementation of digital transformation, as BMI provides an opportunity for
businesses to rethink their existing business models in the twenty first century. Given
the several advantages and opportunities that digital transformation can present, this
study offers valuable theoretical and practical contributions. The impact of BMI
through digital transformation on overall business performance should therefore be
measured to monitor the degree to which the business has digitally transformed its
business model to fully capture its potential value. It also offers an opportunity to
identify strengths, weaknesses, and opportunities for improvement (Proença and
Borbinha 2016) and to adjust the newly transformed business model (Verhoef et al.
2021) to ensure that the process remains current and relevant to the business.
Verhoef et al. (2021) claim that businesses should measure the level of perform-
ance improvement through their KPIs, enabling them to adjust their business models
where needed. Venkatraman and Ramanujam (1986) argued that business perform-
ance can be measured through financial and/or organisational performance. Financial
performance can be measured using indicators such as sales, sales growth, profitabil-
ity, and stock prices. Organisational performance can be measured by market share,
new products, operational efficiency, product quality, and societal welfare. Kaplan
and Norton (1992) use a balanced scorecard to measure business performance from
four perspectives: (1) financial, (2) customer, (3) internal business, and (4) innovation
and learning. Based on this, Hypothesis 1 is developed.
Hypothesis 1 (H1þ): Business model innovation through digital transformation

positively influences the business performance of SMEs.
2.3. Small and medium-sized enterprises

SMEs are key drivers of both emerging and developed economies. SMEs are generally
defined by the number of employees and turnover. According to the South African
National Small Enterprise Act (No. 29 of 2004) and the European Union’s recommenda-
tion of 2003/361, SME have a maximum of 250 employees, with a maximum net turn-
over of R220 million for South African SMEs and e40 million for Dutch SMEs. The total
number of SMEs in South Africa during the third quarter of 2021 was 2,404,564, with
only 677,786 SMEs in the formal sector and approximately 1,641,859 in the informal sec-
tor (SEDA 2021). South African SMEs in the formal sector are registered under the
National Small Enterprises Act, adhere to legal requirements, pay taxes, and contribute to
the country’s economy. In contrast, those in the informal sector are not formally regis-
tered, do not pay taxes, do not necessarily comply with all legal requirements, and earn
income for themselves and often for some employees (SME South Africa, 2022).
In the Netherlands, there were 1,239,822 SMEs in the formal sector by 2021
(Statista 2022). SMEs in both countries contribute significantly to employment and
economic growth (Statista 2022; StatsSA 2020). Despite the many advantages and
opportunities to do so, SMEs have low adoption of digital transformation and busi-
ness model changes (OECD 2021). Several factors contribute to this, such as the lack
of resources, employee and managerial skills, and access to finance and infrastructure
(Saunila 2016; Woschke, Haase, and Kratzer 2017; Yang 2020). The gap between
countries leading the digital transformation space and lagging is widening.
Digitalisation contributes to productivity and employee wage growth; therefore, these
gaps have increased inequalities among individuals, businesses, and countries (OECD
2021). It has therefore become critical for SMEs to engage in the digital transform-
ation process and adapt and renew their business models accordingly.
2.4. Moderators versus mediators

This study examines the impact of independent variables (BMI through digital trans-
formation) on the dependent variable (business performance). Additionally, studied
how three moderating variables (business culture renewal, flexibility of organisational
structure, and strategic renewal) influence this relationship. Moderating variables can
be either quantitative or qualitative, affecting the strength and/or direction of the
relationship between dependent and independent variables (Baron and Kenny 1986;
Wu and Zumbo 2008). The moderating variable acts almost as another independent
variable, and the actual relationship between the dependent and independent variables
is revealed more clearly when the moderating variables are included. A mediator is a
variable that explains the causal effect between independent and dependent variables
(Wu and Zumbo 2008). These variables mediate between the dependent and inde-
pendent variables (Baron and Kenny 1986). When using mediators in a model, it is
hypothesised that there is no direct relationship between the independent and
dependent variables, and that the independent variable first impacts the mediator var-
iable(s); the mediator(s) then influence the dependent variable (Namazi and Namazi
2016). Considering this, we included moderating variables in the research model due
to their impact on the relationship between the independent and dependent variables.
Additionally, the variables do not act as mediators since we hypothesised (in H1þ)
that there is a relationship between the independent and dependent variables.
2.5. The moderating role of culture renewal

Organisational culture represents the identity of a business, which consists of the val-
ues, norms, and behaviors that guide employees (Asaah et al. 2020). Schein (1991)
described culture as an ethos present throughout the business and characterised the
behavior of employees. An organisational culture should guide employees on how
they are expected to act and behave. A culture of innovation is a way of creating,
developing, and establishing values, norms, and behaviors that require employees to
accept and support change, such as new and improved products, services, structures,
and business models (Çakar and Ert€ urk 2010). Albrecht (2015) claimed that culture is
one of the main factors contributing to the failure of digital transformation. Pedersen
(2022) stated that business leaders lack understanding and knowledge of how the cul-
ture of a business changes during the digital transformation process. Cultural change
refers to how digital transformation impacts and alters business culture, as opposed
to cultural continuity, which refers to unchanged elements. Digital transformation
requires cultural change and cultural continuity (Pedersen 2022). Some authors refer
to the adoption of digital culture (Hemerling et al. 2018; Rowles and Brown 2017),
which suggests taking on an entirely new culture. However, in this study, we found
the concept of cultural renewal to be more appropriate since the business adopts a
renewed identity when engaging with digital transformation. Murawski and Bick
(2017) claim that a business should adapt its culture, mindset, and behaviors to
accommodate changes and new ways of working in the Digital Age. Employee
engagement and development are emphasised in the cultural renewal process, since
employees must be skilled to work productively and deliver results during the digital
transformation process. Hemerling et al. (2018) identified three reasons that digital
culture should be embedded during digital transformation. First, digital transform-
ation can fail if the business ignores the cultural factor. Second, the digital culture
can empower employees and deliver results faster. Third, digital culture can attract
the right pool of skills and talents. Therefore, culture impacts digital transformation.
Odhiambo, Kibera, and Musyoka (2015) found that culture significantly affected per-
formance, yet organisational culture is often not considered a key factor in determin-
ing business performance (Cameron and Quinn 2011). The arguments indicate that
BMI and digital transformation can positively impact business performance, and cul-
tural renewal is essential in the digital transformation process. Therefore, we expected
culture renewal to act as a moderator, and with these inputs, Hypothesis 2 was
developed:
Hypothesis 2 (H2þ): Culture renewal has a supporting moderating impact on the rela-
tionship between business model innovation through digital transformation and the
business performance of SMEs.
2.6. The moderating role of the organisational structure

Apart from the digital skills and resources needed by a business to implement digital
transformation successfully, we should examine the required organisational changes
resulting from digital transformation, such as organisational culture, processes, and
structures (Badasjane et al. 2022; Verhoef et al. 2021; Zhang, Xu, and Ma 2022), since
the business needs to adapt to digital changes (Eggers and Park 2018). Organisational
structure needs to be considered since a flexible and agile structure is necessary to
accommodate digital changes (Petkovic and Lukic 2014; Verhoef et al. 2021).
Organisational structures define and depict how roles and responsibilities are allo-
cated, and decision-making takes place (Jones and Jones 2013). Therefore, organisa-
tional structures are important and relevant to digital transformation (Badasjane et al.
2022; Sklyar et al. 2019). Porter and Heppelmann (2014) claim that digital technolo-
gies have the power and ability to disrupt and transform traditional organisational
structures. However, despite their importance and implications, many businesses fail
to align their organisational structure, culture, processes, and employees (Tulenheimo
2015), resulting in many businesses merely adding digital elements to their business
model instead of engaging with BMI through digital transformation by embedding it
into their business. Petkovic and Lukic (2014) state that there is a need for new
organisational structures, as the old structures do not allow flexibility and rapid
response to environmental changes. Despite the importance of aligning the organisa-
tional structure with the digital transformation process, it is difficult to achieve this.
Petkovic and Lukic (2014) concur that one of the significant challenges for business
leaders is introducing an organisational structure that is flexible, agile, responsive,
and open to innovation. From the above, we can conclude that there is a need to
identify new forms of organisational structure by designing and managing the organ-
isational structure to accommodate digital transformation. Given the hypothesised
positive relationship (H1þ) between BMI through digital transformation and business
performance, we propose that when a business implements a flexible organisational
structure, this moderates the relationship between BMI through digital transformation
and business performance. Based on this reasoning, we propose the following
hypothesis:
Hypothesis 3 (H3þ): The organisational structure has a supporting moderating impact

on the relationship between business model innovation through digital transformation
and the business performance of SMEs.
2.7. The moderating role of strategic renewal

Over the past few years, strategic renewal has become important in the management
research domain. It is defined as altering a business’s strategic path and capabilities
(Schmitt, Raisch, and Volberda 2018). A business should constantly update its strat-
egies and resources to maintain its competitive advantage (Wang et al. 2020). Digital
transformation forces businesses to renew their strategies to survive the digital age.
Wang et al. (2020) found that strategic renewal through digital transformation offers
many advantages to a business, such as satisfying customer needs, reducing resource
wastage, and achieving ambidexterity. Other authors have supported the notion of a
digital strategy, defined as an organisational strategy designed to leverage digital
resources to create and capture differential value (Bharadwaj et al. 2013; Gudergan
and Mugge 2017). Formulating a digital strategy should identify the scope of digital
transformation and areas that should be changed (Correani et al. 2020). Conversely,
digital strategy implementation refers to how well the new digitally enabled business
model has been implemented. Leadership plays an essential role in formulating and
implementing a strategy, focusing on digital capability development, and providing

vision and governance to identify and exploit digital opportunities (Azhar et al. 2013;
Ramos, Loures, and Deschamps 2020). Despite the increase in the literature on digital
transformation, business leaders and managers continue to lack skills and knowledge
in the formulation and execution of digital strategies, which is one of the main rea-
sons why only a few businesses have successfully implemented digital transformation
successfully (Hess et al. 2016; Hyv€onen 2018; Matt, Hess, and Benlian 2015). Because
of the many opportunities that digital transformation can offer, some authors argue
that it cannot only form part of the overall business strategy, because it impacts both
the managerial level and dynamic capability requirements of employees (Vial 2021;
Warner and W€ager 2019). Dynamic capabilities are critical to businesses that need to
survive in digital realities. Teece (2010) categorises dynamic capabilities as sensing,
seizing, and transforming activities. It is the process of identifying digital opportuni-
ties (sensing), using, and exploiting available business resources (seizing), and con-
tinuously adapting and renewing existing resources (transforming) (Albort-Morant
et al. 2018). Warner and W€ager (2019) claimed that the digital transformation process
requires dynamic capabilities to ensure business success and ongoing strategic
renewal. Therefore, this study uses the term strategic renewal instead of digital strat-
egy. Wang et al. (2020) find that a digital transformation strategy positively impacts
short- and long-term business performance. Teng, Wu, and Yang (2022) agree that
digital transformation positively mediates the effect of digital transformation strategies
on the financial performance. However, considering the abovementioned arguments,
we argue that strategic renewal acts as a moderator as opposed to a mediator, since
we hypothesise (H1þ) that BMI through digital transformation positively impacts
business performance, and that the renewal of the strategy can strengthen this rela-
tionship. Therefore, we propose the developed Hypothesis 4:
Hypothesis 4 (H4þ): Strategic renewal has a supporting moderating impact on the rela-
tionship between business model innovation through digital transformation and the
business performance of SMEs.
3. Research model
Literature on business model innovation, digital transformation, organisational struc-
ture, culture, and strategy was consulted, which reported that organisational structure,
culture, and strategy play a vital role in BMI and the digital transformation process
(Murawski and Bick 2017; Pedersen 2022; Verhoef et al. 2021; Wang et al. 2020).
This can contribute to the overall business performance of SMEs. Figure 1 shows the
research model and hypotheses.
4. Research methodology
4.1. Sample description and data collection
The study population consisted of South African and Dutch SMEs, as defined in the
literature section. Despite the benefits offered by digital transformation, both South
Figure 1. Research model and hypotheses.
African and Dutch SMEs can improve the adoption of digital technologies and digit-
ally transforming their business models. Therefore, both an emerging (South Africa)
and developed economy (Netherlands) were included in the study, despite their dif-
ferent economic positions (State of SMEs Annual Report 2021; State of South African
Small Business 2022). This would enable South African SMEs to learn from Dutch
practice and vice versa since both countries have different strengths and weaknesses
in the adoption of digital technologies and digitally transforming their business mod-
els. A limitation of the chosen population is that the results cannot be compared to
other research investigating similar contexts owing to differing economic positions.
A non-probability sampling technique was used to collect the data, to ensure
SMEs from any industry and size operating either within South Africa or the
Netherlands could participate in the study. A quantitative method was employed
using online surveys, which was distributed to South African and Dutch SMEs from
January 2022 to May 2022. Research companies in South Africa and the Netherlands
assisted with the data collection process for each country. A total of 424 responses
were collected from both countries (198 South African and 226 Dutch). According to
Pallant (2007), the sample size is deemed acceptable to conduct statistical analysis
such as an exploratory factor analysis and regression analysis. The respondents’
demographic characteristics are presented in Table 1.
4.2. Statistical analysis

The data were analysed using IBM SPSS (Version 28). First, an exploratory factor
analysis (EFA) was conducted to determine which factors should be grouped. Second,
regression analysis was conducted to assess the relationship between the independent
and dependent variables and to test the impact of the three moderators. Third, a cor-
relation analysis was conducted to explore the interrelationships between the variables
and assess the strength of the linear relationships. Finally, a multivariate analysis of
variance (MANOVA) was conducted to determine any significant differences between
South African and Dutch business performance.
5. Findings
5.1. Instrument measurement
The survey instrument measured five constructs: (1) business culture renewal, (2)
flexibility of organisational structure, (3) strategic renewal, (4) BMI through digital
Table 1. Demographics of respondents.

South-Africa Netherlands
Frequency Frequency
n % n %
Number of employees
Only myself (no employees) 14 7.1 Only myself (no employees) 84 37.2
< 5 employees 77 38.9 < 5 employees 37 16.4
5–20 employees 70 35.4 5–20 employees 21 9.3
Annual Turnover
< R15 million 137 69.2 < e 2 million 117 51.8
R15–R80 million 36 18.2 e 2 million–e 10 million 34 15.0
R80–R220 million 6 3.0 e 10 million–e 50 million 34 15.0
> R220 million 3 1.5 I would prefer not to disclose this information. 41 18.1
I would prefer not to disclose this information. 16 8.1
Industry
Agriculture 1 0.5 Agriculture 12 5.3
Mining and quarrying 4 2.0 Manufacturing 13 5.8
Manufacturing 14 7.1 Electricity, gas, steam & water 6 2.7
Electricity, gas, steam & water 5 2.5 Construction 9 4.0
Construction 13 6.6 Retail motor trade & repair services 3 1.3
Retail motor trade & repair services 1 0.5 Wholesale 13 5.8
Wholesale 6 3.0 Catering and accommodation and other trade 10 4.4
Catering and accommodation and other trade 9 4.5 Transportation, storage, and communications 17 7.5
Transport, storage, and communications 4 2.0 Finance and business services 60 26.5
Finance and business services 40 20.2 Community, social and personal services 33 14.6
Community, social and personal services 4 2.0 Other, please specify 50 22.1
Other, please specify 97 49.0
Source: Own compilation.
Note. In the South African context, ‘other industries’ included healthcare, law, education, real estate, training and
development, and media and publishing. In the Dutch context, other industries included healthcare, entertainment,
information, communication technology, fitness, culture, and tourism
transformation, and (5) business performance. The items for each construct were
developed based on an extensive literature search (Table 2). Brislin (1986) argues that
a country’s official language should be used to ensure that the translation is accurate.
Based on this, the survey was conducted in English for South African and Dutch
SMEs in the Netherlands. Although English is not the only official language in South
Africa, it is the main language in South African public life. A native Dutch speaker
translated the survey from English into Dutch before it was distributed in the
Netherlands. Respondents were asked to indicate their level of agreement and rate
their level of satisfaction on a scale of 1–5 regarding their perception of the state-
ments presented in each construct. Respondents subjectively answered the questions
based on their knowledge, understanding, and expertise of the constructs in relation
to the SME.
To assess the internal consistency of the constructs and items, Cronbach’s alpha
test was applied. The values usually range between 0 and 1, but acceptable values
should be 0.70 or higher, indicating the inter-relatedness of items and validity of the
measuring instrument (Tavakol and Dennick 2011). The study used the guidelines of
Tavakol and Dennick (2011) to interpret these values. As seen in Table 2, all alpha
values for the five constructs and the items within each construct were above 0.7,
12
Table 2. Descriptive statistics and reliability of constructs and items for South Africa and The Netherlands.
South Africa Netherlands
Literature background Items Cronbach’s a Mean Median SD Percentage Mean Median SD Percentage
Construct: the flexibility of organizational structure (a ¼ 0.847)
Lee and Our organizational structure is 0.843 3.91 4.00 0.993 73.7% 3.80 4.00 1.008 61.9%
Edmondson(2017); flexible
Lazarevic and Lukic, Our organizational structure 0.828 3.78 4.00 1.048 69.7% 3.85 4.00 0.898 61.5%
(2018) empowers employees through less
centralized decision-making
Our structure allows for external 0.826 3.93 4.00 1.000 75.3% 3.43 3.00 1.146 67.7%
C. VAN TONDER ET AL.
collaboration
Blatz, Bulander and Employees can exchange information 0.814 3.91 4.00 1.021 73.7% 3.46 3.00 1.104 47.3%
Dietel(2018); and communicate with each other
Schumacher, Erol, via collaboration platforms
and Sihn (2016) Our organizational structure supports 0.803 4.10 4.00 0.980 81.8% 3.77 4.00 0.885 47.3%
multifunctional teamwork across
departments
Majstorovic, Mitrovic, Our employees are encouraged to 0.812 4.39 5.00 0.777 92.4% 3.79 4.00 0.917 62.4%
and Miskovic (2020) take the initiative (e.g. suggest
new ideas, solutions, etc.)
Construct: strategic renewal (a ¼ 0.851)
Schumacher, Erol, and We have a digital strategy in place 0.793 3.67 4.00 1.127 59.6% 3.09 3.00 1.145 38.1%
Sihn (2016); Blatz, (i.e. a strategic plan formulated to
Bulander, and Dietel achieve specific goals through
(2018); Warner and digital technologies)
W€ager (2019)
Majstorovic, Mitrovic, We have a digital transformation 0.790 3.41 4.00 1.166 51.0% 3.42 3.00 1.030 35.8%
and Miskovic (2020) plan in place
Schumacher and Most strategic decisions are based on 0.844 3.37 3.00 1.176 47.5% 3.15 3.00 1.067 49.1%
Nemeth, (2019) data and analytics
Trotta and Garengo Our employee training is aligned 0.814 3.52 4.00 1.079 55.6% 3.07 3.00 1.170 38.9%
(2019) with the renewed strategy, which
accommodates changes in digital
technologies
Construct: business culture renewal (a ¼ 0.894)
Latifi, Nikou, Bouwman Our culture is focused on constant 0.872 4.12 4.00 0.904 79.8% 3.73 4.00 0.948 58.0%
(2021) innovation (e.g. open to new
techniques and methods)
0.869 4.13 4.00 0.929 79.8% 3.80 4.00 0.885 52.5%
(continued)
Table 2. Continued.
Mueller and Renken Our culture is supportive of digital
(2017) transformation
Hartl and Hess (2017) Our culture is open to change 0.872 4.24 4.00 0.806 86.9% 3.54 4.00 0.953 63.7%
Blatz, Bulander, and Our culture is open to the adoption 0.87 4.24 4.00 0.801 84.8% 3.65 4.00 0.937 62.8%
Dietel (2018) of digital technologies
Simic and Matovic Our culture gives us the ability to 0.876 4.12 4.00 0.879 79.3% 3.79 4.00 0.836 65.5%
(2018); Cichosz et move quickly and easily
al., (2020)
Gonzalez-Varona et al. Our culture encourages risk taking 0.900 3.70 4.00 1.027 61.6% 3.36 3.00 0.957 40.3%
(2020)
Lee and Edmondson, Our organizational structure allows 0.891 4.05 4.00 0.976 76.3% 3.86 4.00 0.868 63.7%
2017; Lazarevic and for faster decision-making in
Lukic, 2018 response to digital changes
Construct: business model innovation through digital transformation (a ¼ 0.932)
Schumacher, Erol, and We use digital technologies to create 0.922 3.70 4.00 1.103 60.1% 3.34 3.00 1.198 42.5%
Sihn (2016) additional value for our customers
(e.g. self-service functions or
product/service customization)
Gonzalez-Varona et al. We use digital technologies to 0.922 3.79 4.00 1.111 66.7% 3.43 4.00 1.061 42.9%
(2020); Klohs and introduce new products/services
Sandkuhl, (2020)
Latifi, Nikou,
Bouwman (2021)
Berghaus and Back, We use digital technologies to 0.922 3.95 4.00 0.984 73.2% 3.26 3.00 1.091 52.7%
(2016) improve our internal processes
Schumacher, Erol, and Our employees receive regular 0.928 3.32 3.00 1.092 48.0% 3.18 3.00 1.164 46.5%
Sihn (2016); Trotta training to obtain new digital
and Garengo (2019); capabilities
Schumacher and
Sihn (2020)
Klohs and Sandkuhl We digitally collaborate with external 0.928 4.00 4.00 1.023 76.8% 3.22 3.00 1.163 37.6%
(2020) partners (i.e. using digital
technologies to collaborate
(continued)
13
14
Table 2. Continued.
through, for example, making
video calls, sharing documents,
managing projects in the
cloud, etc.)
Latifi, Nikou, Bouwman We use digital technologies to 0.921 3.75 4.00 1.151 67.2% 3.09 3.00 1.128 39.4%
(2021) develop new revenue streams
(e.g. additional sales)
C. VAN TONDER ET AL.
Schumacher, Erol, and Our strategy has been renewed in 0.928 4.09 4.00 0.922 77.8% 3.37 3.00 1.059 45.1%
Sihn (2016); Warner the past two years to
and W€ager (2019) accommodate changes in digital
technologies
Schumacher and The renewed strategy, which 0.928 4.13 4.00 1.022 59.6% 3.33 3.00 1.024 45.6%
Nemeth (2019) accommodates changes in digital
technologies, is implemented and
driven by top-level management
Construct: business performance (a ¼ 0.874)
Kaplan and Norton Growth in our sales volume 0.847 3.26 3.00 1.058 46.5% 3.44 3.00 0.863 47.8%
(1992); Venkatraman Growth in our net profit 0.853 3.15 3.00 0.986 41.4% 3.38 3.00 0.927 48.7%
and Ramanujam Our market share 0.846 3.11 3.00 0.958 33.8% 3.38 3.00 0.912 45.1%
(1986) Our penetration rate (percentage of 0.852 3.15 3.00 0.920 38.4% 3.32 3.00 0.808 40.7%
target market size that has
purchased a product/service)
Our speed to the market (how fast 0.852 3.56 4.00 0.995 58.1% 3.48 3.00 0.865 45.6%
you get your product/service in
the market)
Our customer satisfaction rate 0.874 4.10 4.00 0.828 81.3% 3.85 4.00 0.838 66.8%
Our operational efficiency 0.867 3.80 4.00 0.922 69.7% 3.66 4.00 0.823 57.1%
indicating that the scale used was reliable. Table 2 also shows the mean, median,
standard deviation (SD) and percentage scores of both countries.
The results in Table 2 indicate that both South African and Dutch SMEs are digit-
ally transforming their business models, although not fully. The results indicate that
South African SMEs have a slightly more perceived flexible organisational culture
than Dutch SMEs. In addition, both countries scored similarly on strategic renewal,
with values indicating that they are accommodating digital transformation in their
strategies to some extent. The results also show that South African SMEs are ahead of
their Dutch counterparts in terms of business culture renewal, scoring higher than
Dutch SMEs on all items of this construct. Furthermore, both countries are innovat-
ing their business models through digital transformation to some extent, yet South
African SMEs scored much higher than Dutch SMEs. A positive finding is that South
African SMEs seem to have given more focus than Dutch SMEs to renew their strat-
egy over the past two years to accommodate changes in digital technologies, as indi-
cated by a higher score. Table 2 shows that South African SMEs are currently using
digital technologies more than Dutch SMEs. South African SMEs have the perception
that they are using digital technologies to create additional value for their customers
(60.1%), to introduce new products/services (66.7%), to serve new customer markets
(66.7%), to improve their internal processes (73.2%) and to develop new revenue
streams (67.2%). Additionally, they digitally collaborate with external partners
(76.8%). Yet less than half of the SMEs train their employees to develop digital capa-
bilities (48.0%). However, based on the Dutch SMEs’ perception, they are using
digital technologies to a lesser extent, such as creating additional value for their cus-
tomers (42.5%), introducing new products/services (42.9%), serving new customer
markets (44.2%), improving their internal processes (52.7%), and developing new rev-
enue streams (39.4%). Additionally, they train their employees to develop digital
capabilities (46.5%), but only a few of the SMEs digitally collaborate with external
partners (37.6%). The results are however based on the current operating environ-
ment of the SMEs, for example South African SMEs have only adopted digital tech-
nologies at a much later stage than Dutch SMEs, therefore, it is perceived that they
are currently adopting digital technologies at a greater extent, and they are more
open towards digital transformation and BMI than Dutch SMEs. Despite this, the
table shows that Dutch SMEs were slightly more satisfied with their overall business
performance than South African SMEs.
We then conducted an EFA to determine which factors should be grouped (Yong
and Pearce 2013). A multiple regression analysis was used to identify the relationships
between the dependent variable (business performance) and the independent variable
(business model innovation through digital transformation), including three modera-
tors (business culture renewal, flexibility of organisational structure, and strategic
renewal). This is discussed in the following section.
5.2. Exploratory factor analysis

Before we could conduct EFA, the dataset was tested to determine if it was suitable
(Williams, Onsman, and Brown 2012), using the Kaiser–Meyer–Olkin (KMO)
Table 3. KMO and Bartlett’s test for independent variables.

KMO and bartlett’s test
Kaiser-meyer-olkin measure of sampling adequacy 0.947
Bartlett’s test of sphericity Approx. Chi-square 7836.172
df 325
Sig. 0.000
measure of sampling adequacy and Bartlett’s test of sphericity, as presented in Table 3.

The KMO value should be greater than 0.6, and the significance of the Bartlett’s test of
sphericity should be less than 0.05. Table 3 indicates that the data are suitable for EFA
according to these guidelines.
The factor extraction method was applied to determine which scale items were
intercorrelated using principal axis factoring as the rotation method. The rotation
results indicate that scale items C1 (‘Our strategy has been renewed in the past two
years to accommodate changes in digital technologies’) and C2 (‘The renewed strat-
egy, which accommodates changes in digital technologies, is implemented and driven
by top-level management’) correlated more strongly (0.557; 0.531) with variable 1
(flexibility of organisational structure). Second, scale item B7 (‘Our organisational
structure allows for faster decision-making in response to digital changes’) correlated
more strongly (0.508) with variable 2 (Strategic Renewal), contrary to the initial
instrument. Pallant (2007) indicates that values above 0.3 indicate an acceptable mod-
erate relationship. The empirical results presented by the rotation method were used
for further analyses; therefore, scale items C1 and C2 were included in variable 1 and
scale item B7 was included in variable 2 after the literature was consulted.
5.3. Regression analysis

Next, a regression analysis was performed separately for both countries. Due to country
differences (South Africa being an emerging economy and the Netherlands a developed
economy), the data could not be merged. Pearson’s correlation coefficients were used to
determine the relationships between the constructs. Furthermore, we used Taylor’s
(1990) suggestion to interpret the strength of the relationships, with values lower than
0.35 represents a weak relationship, values between 0.36 to 0.67 represents a moderate
relationship and values higher than 0.68 represent a strong relationship. Tables 4, 5
show the correlation matrices for South Africa (SA) and the Netherlands (NL).
Tables 4, 5 indicate that, as expected, a moderate relationship (SA ¼ 0.393; NL ¼
0.411) exists between Business Model Innovation Through Digital Transformation
(BMI_DT) and Business Performance (BP) for both countries. Additionally, the
unstandardised beta indicates that for every unit where BMI_DT increases, BP
increases (0.330 for SA and 0.316 for NL), suggesting that if SMEs engage with BMI
through digital transformation, they can expect an improvement in their overall busi-
ness performance. Therefore, Hypothesis 1 is supported for both countries.
Our objective was also to assess the role of moderators; therefore, we conducted a
moderation test by including interaction variables, as indicated in the research model
(H2þ, H3þ, H4þ). H2þ measured the interaction between BMI_DT and Business
Culture Renewal (CR). H3þ measured the interaction between BMI_DT and the
Table 4. South Africa correlations.

Performance BMI_DT OS Int. OS CR Int. CR SR Int. SR
Performance 1.000 0.393 0.247 0.072 0.390 0.150 0.333 0.029
BMI_DT 0.393 1.000 0.440 0.146 0.719 0.369 0.730 0.404
OS 0.247 0.440 1.000 0.300
Int. OS 0.072 0.146 0.300 1.000
CR 0.390 0.719 1.000 0.393
Int. CR 0.150 0.369 0.393 1.000
SR 0.333 0.730 1.000 0.331
Int. SR 0.029 0.404 0.331 1.000
Note. BMI_DT: Business Model Innovation Through Digital Transformation; OS: Organizational Structure; CR: Culture
Renewal; SR: Strategic Renewal.
p < 0.000; p < 0.020; p < 0.340.
Table 5. Netherlands correlations.

Performance BMI_DT OS Int. OS CR Int. CR SR Int. SR
Performance 1.000 0.411 0.544 0.104 0.519 0.001 0.415 0.143
BMI_DT 0.411 1.000 0.562 0.013 0.620 0.028 0.771 0.193
OS 0.544 0.562 1.000 0.129
Int. OS 0.104 0.013 0.129 1.000
CR 0.519 0.620 1.000 0.130
Int. CR 0.001 0.028 0.130 1.000
SR 0.415 0.771 1.000 0.194
Int. SR 0.143 0.193 0.194 1.000
Note. BMI_DT: Business Model Innovation Through Digital Transformation; OS: Organizational Structure; CR: Culture
Renewal; SR: Strategic Renewal.
p < 0.000; p < 0.002; p < 0.059; p < 0.496.
Table 6. Model summary of South African moderator interactions.

Model summary
Change statistics
Std. the error in
2 2 2
Model R R Adjusted R the estimate R change F change df1 df2 Sig. F change
1 .423a 0.179 0.170 0.633 0.179 21.196 2 195 0.000
2 .423b 0.179 0.167 0.634 0.001 0.159 1 194 0.690
1 .402c 0.161 0.153 0.640 0.161 18.752 2 195 0.000
2 .402d 0.161 0.148 0.641 0.000 0.013 1 194 0.911
1 .399e 0.159 0.150 0.640 0.159 18.449 2 195 0.000
2 .425f 0.180 0.168 0.634 0.021 5.009 1 194 0.026
a
Predictors: (Constant), CR, BMI_DT.
b
Predictors: (Constant), CR, BMI_DT, Int. CR.
c
Predictors: (Constant), OS, BMI_DT.
d
Predictors: (Constant), OS, BMI_DT, Int. OS.
e
Predictors: (Constant), SR, BMI_DT.
f
Predictors: (Constant), SR, BMI_DT, Int.BM_DT.
g
Dependent Variable: Business Performance.
flexibility of the (OS). H4þ measured the interaction between BMI_DT and Strategic
Renewal (SR), as indicated in Tables 6 (SA) and 7 (NL).
Table 6 shows the interaction of the moderators in South Africa. First, CR did not
act as a moderator (sig. ¼ 0.690). The interaction between CR and BMI_DT supports
this (R2 change ¼ 0.001); consequently, Hypothesis 2 for South Africa was rejected.
If an SME renews its culture, it does not increase the impact of BMI_DT on BP.
Second, the flexibility of the OS did not act as a moderator (sig ¼ 0.911).
The interaction between OS and BMI_DT further indicated that OS was not a
Table 7. Model summary of Netherlands moderator interactions.

Model summary
Change statistics
Adjusted Std. the error
Model R R square R square in the estimate R square change F change df1 df2 Sig. F change
1 .532a 0.283 0.276 0.581 0.283 43.933 2 223 0.000
2 .535b 0.286 0.277 0.580 0.004 1.161 1 222 0.282
1 .559c 0.313 0.306 0.568 0.313 50.711 2 223 0.000
2 .584d 0.341 0.332 0.558 0.028 9.414 1 222 0.002
1 .439e 0.193 0.185 0.616 0.193 26.588 2 223 0.000
2 .499f 0.249 0.239 0.595 0.057 16.752 1 222 0.000
a
Predictors: (Constant), MC_CR, MC_BMI_DT.
b
Predictors: (Constant), MC_CR, MC_BMI_DT, Int. CR.
c
Predictors: (Constant), MC_OS, MC_BMI_DT.
d
Predictors: (Constant), MC_OS, MC_BMI_DT, Int. OS.
e
Predictors: (Constant), MC_SR, MC_BMI_DT.
f
Predictors: (Constant), MC_SR, MC_BMI_DT, Int.BMI_DT.
g
Dependent Variable: Performance.
moderator (R2 change ¼ 0.000). Therefore, Hypothesis 3 for South Africa is rejected.
SMEs that implement a flexible organisational structure will not increase the impact
of BMI_DT on BP. Finally, SR acts as a moderator (sig ¼ 0.026), with the interaction
between SR and BMI_DT being significant (R2 change ¼ 0.021). Therefore,
Hypothesis 4 is accepted for South Africa. This means that the strategic renewal of
SMEs increases the impact of BMI_DT on BP. In addition, by increasing BMI_DT,
(i.e. increasing the degree to which digital technologies are used as seen in Table 2),
BP will increase if the business successfully renews its strategies.
Table 7 shows the interaction between moderators in the Netherlands. First, CR
does not act as a moderator (sig ¼ 0.282). The interaction between CR and BMI_DT
further supports this (R2 change ¼ 0.004), which is in line with the findings in the
South African context. Therefore, Hypothesis 2 for the Netherlands is rejected.
Second, the flexibility of OS acts as a moderator (sig ¼ 0.002), and the interaction
between OS and BMI_DT further supports this (R2 change ¼ 0.028), yet contradicts
the findings of the South African sample, where OS does not act as a moderator.
Nevertheless, Hypothesis 3 was supported for the Netherlands. An SME that imple-
ments a flexible organisational structure will increase the impact of BMI_DT on busi-
ness performance. If the business increases BMI_DT, business performance will also
increase if the business successfully implements a flexible organisational structure.
Finally, SR acts as a moderator (sig ¼ 0.000), and the interaction between SR and
BMI_DT further supports this (R2 change ¼ 0.057); therefore, Hypothesis 4 for the
Netherlands is accepted. This means that renewal of the SMEs strategy will increase
the impact of BMI_DT on business performance. By increasing BMI_DT (i.e. increas-
ing the degree to which digital technologies are used as seen in Table 2), business
performance will also increase, and the business will successfully renew its strategy.
Based on the above, Table 8 summarises the hypotheses results for both countries.
5.4. Multivariate analysis of variance (MANOVA)

A MANOVA was conducted to determine any significant differences between South
African and Dutch business performances. To perform MANOVA, datasets from
Table 8. Summary of hypothesis results.

South-Africa Netherlands
Hypothesis 1 Accepted Accepted
Hypothesis 2 Rejected Rejected
Hypothesis 3 Rejected Accepted
Hypothesis 4 Accepted Accepted
both countries were merged. We first tested for outliers using the Mahalanobis dis-
tance value, which removed six outliers as the values were above the critical value of
16.27 (Pallant 2007). We then conducted Box’s test of equality of covariance matrices
to determine if the data violated the assumption of homogeneity of variance–covari-
ance matrices. The findings indicated that the assumption was not violated, as the p-
value was p 0.001 (0.021). Furthermore, Levene’s test also revealed that none of the
variables had a p-value of p 0.05, with all values exceeding 0.3. This also suggests
that the data did not violate the assumption of variance equality. We then conducted
the Wilks’ lambda test to determine any significant differences between the two coun-
tries about the five constructs (CR, OS, SR, BMI_DT, and BP).
As expected, considering that South Africa is an emerging country and the
Netherlands is a developed economy, the results show a significant difference between
the two countries in Constructs 1–4 (CR, flexibility of OS, SR, and BMI_DT), with
p 0.05. Partial eta-squared values were used to determine effect size. The partial eta-
squared effect size indicates the proportion of the variance of the dependent variable
explained by the independent variable, with values ranging from 0 to 1. We used
Cohen’s (1988) guidelines to interpret the small (0.01), medium (0.06), and large
(0.14) effect sizes. Although Cohen’s guidelines specify eta-squared, they can also be
used to interpret partial eta-squared (Pallant 2007). Using these benchmarks, the
results indicated that the effect sizes for Constructs 1–4 were all medium (CR ¼
0.092; flexibility of OS ¼ 0.081; SR ¼ 0.047; BMI_DT ¼ 0.027).
However, an interesting finding is the results for Construct 5 (BP), which indicated
that there is no significant difference between the business performance of South
Africa and the Netherlands (Wilks’ lambda ¼ 0.847; p ¼ 0.000, partial eta-squared ¼
0.153). To confirm the results, we conducted two additional tests. First, we tested the
between-subject effect, and the results showed that the sig value for the independent
variables was p 0.05. However, the sig value for business performance is p 0.05
(0.453), indicating no significant difference between the two countries. Second, we
used Bonferroni adjustment to confirm the results by dividing the p-value by the
number of analyses on the dependent variable; the sig value remained p 0.05.
Table 9 shows the estimated marginal means of Factors 1–5 for South Africa and
the Netherlands to show how SMEs responded differently to each of the five
constructs.
For constructs 1–4, the South African respondents scored higher than the Dutch
respondents on CR (SA ¼ 3.843; NL ¼ 3.310), OC flexibility (SA ¼ 4.094; NL ¼
3.686), SR (SA ¼ 4.018; NL ¼ 3.697), and BMI_DT (SA ¼ 3.503; 3.198). Dutch
respondents scored slightly higher only about performance (SA ¼ 3.443; NL ¼
3.494). These findings are intriguing considering that Dutch SMEs are among the top
European performers in adopting digital transformation, and South African SMEs
Table 9. Estimated marginal means.

95% Confidence interval
Dependent variable Mean Std. error Lower bound Upper bound
Business culture renewal South Africa 3.843 0.060 3.726 3.960
Netherlands 3.310 0.056 3.199 3.420
The flexibility of the organizational structure South Africa 4.094 0.049 3.998 4.190
Netherlands 3.686 0.046 3.595 3.777
Strategic renewal South Africa 4.018 0.051 3.917 4.119
Netherlands 3.697 0.049 3.601 3.792
BMI through digital transformation South Africa 3.503 0.065 3.374 3.631
Netherlands 3.198 0.062 3.077 3.319
Performance South Africa 3.443 0.049 3.347 3.540
Netherlands 3.494 0.046 3.403 3.585
tend to lag. It is evident that South African SMEs have a different perspective on
each construct than Dutch SMEs do.
Discussion
The primary purpose of this study is to determine whether business model innovation
through digital transformation positively impacts the business performance of SMEs.
More specifically, the supporting impact of culture renewal, flexibility of organisational
structure, and strategic renewal on the relationship between business model innovation
through digital transformation and business performance lacks investigation. Our study
aimed to close this important theoretical gap by including these three factors as moder-
ators. Digital transformation plays a catalytic role in a business’s survival and competi-
tive advantage, with the potential to improve its performance. It also requires
businesses to reinvent their business models to create new value for their customers
(Carcary, Doherty, and Conway 2016; Fitzgerald et al. 2014; Verhoef et al. 2021;
Warner and W€ager 2019). This can be achieved through BMI, which improves busi-
ness performance (Hartmann, Oriani, and Bateman 2013; Heij, Volberda, and Van den
Bosch 2014; Teece 2010). To further explore BMI and digital transformation, we argue
that SMEs should engage with BMI by implementing digital transformation. We also
aimed to extend the perspective on BMI through digital transformation in the context
of South African and Dutch SMEs by examining whether there are any significant dif-
ferences between the two countries regarding the five constructs (business culture
renewal, flexibility of organisational structure, strategic renewal, BMI through digital
transformation, and business performance). It is important to note that South Africa is
regarded as an emerging economy, while the Netherlands is a developed economy, and
one would therefore naturally expect distinct differences between the two countries.
The results were interesting but not as we had initially anticipated. Table 10 summa-
rises the similarities and differences between the two countries, based on these findings.
The similarities and differences are discussed below:
5.5. Hypothesis 1
Our study empirically supports the notion that BMI (Guo et al. 2017; Hartmann,
Oriani, and Bateman 2013; Latifi, Nikou, and Bouwman 2021) and digital
Table 10. Similarities and differences between South Africa and The Netherlands.
Hypotheses Similarities between South African and Dutch SMEs Differences between South African and Dutch SMEs
Innovating the business model through digital transformation positively South African SMEs are more satisfied with their
impacts the overall business performance of SMEs. operational efficiency and speed to the market than
SMEs have not yet entirely achieved successful BMI through digital Dutch SMEs.
transformation, with a distinct lack of employee training that focuses on
developing digital capabilities.
SMEs are also not fully satisfied with their business performance in the areas
of their (1) sales volume, (2) net profit, (3) market share, and (4) penetration
rate. However, most SMEs are satisfied with their customer satisfaction rate.
Cultural renewal does not have a supporting impact on the relationship The majority of South African SMEs’ culture is
between BMI through digital transformation on business performance. focused on constant innovation, supports digital
Despite this, SMEs have an open and agile culture toward adopting digital transformation, and is open to risk-taking, as
technologies. opposed to only half of the Dutch SMEs with these
cultural characteristics.
The organisational structures of SMEs are flexible and more decentralised, In the South African context, the flexibility of the
which enables employee empowerment and faster decision-making. organisational structure does not have a supporting
impact on the relationship between BMI through
digital transformation on business performance. Yet,
in the Dutch culture, it does have a supportive
impact.
Almost all South African SMEs encourage their
employees to take the initiative, unlike only a few
Dutch SMEs enabling this.
South African SMEs employees can also exchange
information and communicate with one another
through digital platforms. Their organisational
structure allows for teamwork across departments,
as opposed to only half of the Dutch SMEs enabling
this.
Strategic renewal has a supporting impact on the relationship between BMI No differences were identified between the two
through digital transformation and business performance. countries regarding hypothesis 4.
The SMEs lack the implementation of a digital strategy and transformation
plan, and there is a lack of employee training aligned with the renewed
strategy.
Strategic decision-making in SMEs is, to some extent, based on data and
21
analytics.
transformation (Libert, Beck, and Wind 2016; Ahmad et al. 2021) positively affect
business performance. Specifically, we empirically measure whether BMI through
digital transformation positively impacts the business performance of SMEs. The find-
ings show that BMI through digital transformation has a moderate relationship with
the business performance of SMEs. Therefore, if SMEs increase their BMI through
digital transformation, their business performance will also improve. This means that
SMEs need to use digital technologies to (1) create additional value for their custom-
ers (e.g. self-service functions or product/service customisation), (2) introduce new
products/services, (3) serve new customer markets, (4) improve their internal proc-
esses, (5) train their employees regularly to obtain new digital capabilities, (6) digitally
collaborate with external partners, and (7) develop new revenue streams. This pro-
vides credible evidence to support the notion that SMEs need to reinvent or realign
their business models through digital transformation, which consequently improves
business performance.
We also examined the adoption and usage of digital technologies in these two
countries, and the findings were interesting. First, both countries lack appropriate
employee training and focus on developing digital capabilities. The Netherlands ranks
very highly for digital skills (Digital Economy and Society Index 2022), with many
Dutch SMEs using their employees for their information communication technology
functions (Lisbon Council 2022), which offers a possible reason why digital training
is not a focus for Dutch SMEs. Second, South African SMEs seem to apply digital
technologies more comprehensively in their business models than Dutch SMEs.
However, this could be explained by examining the type of digital technologies
adopted by SMEs, which could result in SMEs answering this question from a differ-
ent perspective, offering future research opportunities. In addition, the State of SMEs
Annual Report (2021) claims that Dutch SMEs still lag in the adoption of digital tech-
nologies, as opposed to larger businesses, owing to a lack of knowledge on selecting
the right technologies, offering a possible reason for the lower and broader usage of
digital technologies in the business model. This also applies to South African SMEs
(State of South African Small Business 2022).
Based on the perceptions of the SMEs from both countries, they indicated that
they were not fully satisfied with their sales volume, net profit, market share, and
penetration rate but were satisfied with their customer satisfaction rates. South
African SMEs were more satisfied with their operational efficiency than Dutch SMEs,
which were not. Nevertheless, it is perceived that Dutch SMEs are more focused on
commercialisation speed, and there is a national digitalisation strategy aimed at
improving the levels of digital technology adoption of Dutch SMEs (Ministry of
Economic Affairs and Climate Policy 2019). Therefore, although SMEs might be
aware of potential operational efficiency improvements, they may lack knowledge of
how to improve them as SMEs tend to possess fewer resources and dynamic capabil-
ities than larger organisations (Saunila 2016; Yang 2020). Effective knowledge man-
agement which is regarded as a dynamic capability (Paarup Nielsen 2006) can assist
SMEs to manage and improve their operational efficiency, contributing to their com-
petitiveness (Kiptalam, Komene, and Buigut 2016).
Furthermore, business performance was measured subjectively from the SMEs’ per-
spective and did not include an analysis of their actual financial statements.
Satisfaction with business performance is therefore a subjective indication, and a
future research opportunity is to measure business performance objectively. Various
authors have identified many factors that play a key role in successfully achieving the
many benefits that digital technologies can offer SMEs, such as culture renewal
(Maedche 2016; Murawski and Bick 2017), organisational structure (Porter and
Heppelmann 2014; Tulenheimo 2015), and strategic renewal (Bharadwaj et al. 2013;
Wang et al. 2020), which we studied through Hypotheses 2, 3 and 4.
5.6. Hypothesis 2
The literature reports contradictory findings regarding the role of business culture
renewal on business performance. Therefore, this study examined the moderating role
of cultural renewal. These results yielded some interesting findings. First, SMEs from
both countries have an open and agile culture towards adopting digital technologies.
However, South African SMEs are perceived to have a culture that is more focused
on constant innovation, supports digital transformation, and is open to risk-taking, as
opposed to Dutch SMEs, which are less receptive of these aspects. This might be
explained by the fact that the Netherlands is one of the most risk-averse countries
(Ferreira, 2018) and tends to have an insufficient learning culture, hindering innova-
tiveness (State of SMEs Annual Report 2021). However, the findings suggest that in
the context of both countries, business culture renewal does not act as a moderator.
These findings have important theoretical implications, as they shed light on the role
of cultural renewal. This means that despite being open towards change, adopting
digital technologies, encouraging risk-taking, being agile, and having an innovative
and supportive culture of digital transformation, it does not impact the relationship
between BMI and business performance. However, this does not mean that it does
not play an essential role, as many authors support adopting a digital culture (e.g.
Hemerling et al. 2018; Maedche 2016; Murawski and Bick 2017; Pedersen 2022).
This offers an opportunity for future research to examine the role of culture in this
relationship.
5.7. Hypothesis 3
Both countries have a flexible and decentralised organisational structure, which con-
curs with the literature stating that SMEs generally tend to have a simpler organisa-
tional structure that enables flat communication (Josefy et al. 2015). The structure
of South African SMEs is perceived to accommodate employee initiative, cross-
teamwork, and information sharing. A possible explanation could be the current
South African National Skills Development Plan for 2030, which focuses on employee
development (Government Gazette 2019). However, the findings show that organisa-
tional structure is not a moderator in South Africa. This could be explained by SMEs
having a relatively simple and underdeveloped organisational structure and therefore
do not regard it as essential role players (Ayandibu and Houghton 2017). In the
Dutch context, however, it acts as a moderator, which concurs with the literature
(Eze, Bello, and Adekola 2017; Hao, Kasper, and Muehlbacher 2012) reporting that
organisational structure plays a key role in business performance. Since Dutch SMEs
are among the top European performers in the adoption of digital transformation
(Digital Economy and Society Index 2022), we argue that SMEs should have a flexible
organisational structure that empowers employees to take initiative and participate in
cross-collaboration, both internally and externally. This is supported by many
authors, who claim that digital transformation brings about change, which requires
continuous adaptations and a flexible organisational structure (Badasjane et al. 2022;
Horvath and Szab o 2019; Petkovic and Lukic 2014; Porter and Heppelmann 2014;
Verhoef et al. 2021). Future research could, however, study the organisational
structures of SMEs to better understand their role.
5.8. Hypothesis 4
The role of strategic renewal in business success has been an important topic in the
management research domain over the past few years. This topic has received consid-
erable attention, emphasising the importance of strategic renewal (Wang et al. 2020).
This has become even more imperative in the digital age (Bharadwaj et al. 2013;
Correani et al. 2020). We respond to this urgent call for strategic renewal in the digital
age by showing that strategic renewal is a moderator in South African and Dutch con-
texts. This adds significant value to existing theoretical claims regarding the impor-
tance of strategic renewal (e.g. Teng, Wu, and Yang 2022; Wang et al. 2020; Warner
and W€ager 2019), especially in the Digital Age. By suggesting that strategic renewal
moderates the relationship between BMI through digital transformation and business
performance, we stress the importance that SMEs need to rethink and adapt their
strategies to accommodate the changes presented by digital transformation. Despite
their importance, the findings regarding the strategic renewal of the two countries are
concerning, as both countries showed a lack of digital strategy, digital transformation
plan, and training aligned with the renewed strategy. This could explain why SMEs
have not yet entirely digitally transformed their business models. The literature has
highlighted that the lack of digital strategy formulation and execution is one of the
main reasons why only a few businesses have successfully implemented digital trans-
formation (Hess et al. 2016; Hyv€ onen 2018; Matt, Hess, and Benlian 2015). However,
literature has also emphasised that SMEs have more limited resources, opposed to
larger organisations (Saunila 2016; Yang 2020), which could contribute to the lack of a
clearly defined strategy, however it does not imply that SMEs cannot implement digital
transformation successfully. Therefore, future research should examine why SMEs still
lack the formulation and implementation of a digital strategy or determine whether
SMEs have a plan in place to start implementing digital transformation, despite not
being part of the formal strategy, as it plays a critical role in digital transformation.
Although SMEs have relatively fewer resources than larger firms, the dynamic
capabilities of SMEs can help them to sense, seize and reconfigure their limited
resources (Teece 2010), in such a way that they can innovate their business models
particularly through digital transformation. Woschke, Haase, and Kratzer (2017)
found that resource limitations financial resources can impact the innovation capabil-
ity of SMEs. Future research should also consider the resource-based theory (cf.
Barney 1991; Wernerfelt 1984) to determine the available resources that SMEs possess
and the impact that this might have on the process of BMI through the digital
transformation.
6. Theoretical implications
The study offers several theoretical and practical contributions. Our findings agree
with literature which has reported that BMI (Foss and Saebi 2017; Latifi, Nikou, and
Bouwman 2021) and digital transformation positively influences business performance
(Marolt et al. 2018; Mubarak et al. 2019). However, currently no study has tested the
effect of three specific moderators, business culture renewal, organisational structure,
and strategic renewal, which are regarded as main contributors in the field of BMI and
digital transformation, on the relationship between BMI through digital transformation
and business performance. Our findings therefore offer several novel theoretical contri-
butions. Firstly, the results of this study indicate that strategic renewal acts as moder-
ator that can strengthen the relationship between BMI and digital transformation on
business performance. Secondly, business culture renewal does not act as a moderator,
offering a unique contribution by shedding light on the role of cultural renewal.
Thirdly, in the South African context organisational structure does not act as a moder-
ator, yet in the Dutch context it does. We therefore argue that a flexible organisational
structure is needed during BMI through digital transformation. Lastly, the analytical
findings towards the implementation of BMI through digital transformation and its
impact on business performance is broadened by the inclusion of SMEs from both an
emerging economy (South Africa) and a developed economy (Netherlands).
7. Managerial implications
SMEs are significant contributors to the economic growth of countries worldwide;
therefore, it is critical to ensure that SMEs keep up with changes in the market envir-
onment, such as digital transformation. The findings of this study have several impor-
tant implications. For starters, despite the many challenges and disruptions that
digital transformation presents to the business model of a business, it positively corre-
lates with business performance, irrespective of whether an SME is in an emerging or
developed economy. This means that innovating the business model through digital
transformation positively impacts business performance. Other factors also positively
influence business performance, such as business culture renewal, flexibility of the
organisational structure, and strategic renewal (in emerging and developed countries).
The focus of this study is that the flexibility of the organisational structure and stra-
tegic renewal can enhance the relationship between BMI through digital transform-
ation and business performance. This indicates that SMEs should make appropriate
changes to their structure and strategy to fully exploit the advantages of digital trans-
formation. This study also identifies multiple ways for SMEs to digitally transform
their business models successfully, which is still lacking. For example, through a
flexible organisational structure, cross-collaboration, openness towards change, adopt-

ing digital technologies, encouraging risk-taking, being agile, and having an innova-
tive and supportive culture, which is possible through the implementation of a digital
strategy and a digital transformation plan.
Finally, the study has already positively impacted several respondents. Many indi-
cated that participating in this study had provided them with guidelines on what they
could do to introduce digital transformation into their business models. Others have
realised a lack of digital transformation within their business models.
8. Limitations and avenues for future research

The study also has its limitations since the sample included SMEs from both an
emerging and developed economy. Firstly, the results cannot be compared to other
research that conducted a similar study with a similar sample group due to the differ-
ent economic positions, threatening the generalisability of the study. However, this
offers a future research opportunity to conduct a similar study in other emerging and
developed economies to strengthen the findings. The second limitation is the survey
instrument which is newly developed and although it is based on an extensive litera-
ture review needs further validation. This opens an avenue for future research since
researchers can validate the research model on another sample. Additionally, this will
enable future researchers to use structural equation modelling (SEM) to analyse the
data, as this study used an exploratory factor analysis since a newly developed meas-
uring instrument was used. Furthermore, the role of culture renewal on the relation-
ship between BMI through digital transformation on business performance can be
studied since it does not act as a moderator, despite the important role that culture
plays. The types of organisational structure implemented by SMEs should also be
studied which could explain the different findings. Lastly, future researchers can study
the level of satisfaction of business performance objectively.
9. Conclusion
This study aims to determine whether business model innovation through digital
transformation positively impacts the business performance of SMEs. Specifically, the
study aimed to determine the impact of three moderators – (1) culture renewal, (2)
organisational renewal, and (3) strategic renewal – on the relationship between BMI
through digital transformation and business performance. By achieving these objec-
tives, this study fills the research gap regarding the impact of BMI and digital trans-
formation on business performance. Furthermore, to our knowledge, this study is the
first to test the effect of three specific moderators, which are regarded as main con-
tributors in the field of BMI and digital transformation, on the relationship between
BMI through digital transformation and business performance. This study makes sev-
eral theoretical and practical contributions to the literature. This study collected
quantitative data from 424 SMEs through surveys consisting of 198 South African
responses and 226 Dutch responses to achieve the research objectives. The research
model was tested using EFA, regression analysis and a MANAVO test. The results
indicate that BMI through digital transformation positively impacts SMEs’ overall
business performance in South African and Dutch contexts, which offers a valuable
theoretical contribution. The results showed significant differences and similarities
between the two countries.
The findings suggest that renewal of business culture does not act as a moderator in
either country. Second, the organisational structure does not act as a moderator in the
South African context but does in the Dutch context. Third, strategic renewal acts as a
moderator for both countries. Finally, the study showed that SMEs from South Africa
and the Netherlands have not entirely transformed their business models through
digital transformation. Generally, South Africa scored slightly higher than Dutch SMEs
on Constructs 1–4 (business culture renewal, flexibility of organisational structure,
strategic renewal and BMI through digital transformation), yet based on the perception
of Dutch SMEs, they were somewhat more satisfied with their business performance.
However, no significant differences were found between the business performances of
the two countries. This study has practical implications for SMEs by emphasising the
importance of BMI through digital transformation as it positively influences overall
business performance and offers insights into how this can be achieved.
Ethical compliance
All procedures performed in studies involving human participants were in accordance
with the ethical standards of the institutional research committee.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Funding
This study was supported by the NRF-NUFFIC PhD Scholarship from the National Research
Foundation. Author C van Tonder was supported by the NRF-NUFFIC PhD Scholarship.
Notes on contributors
Chante van Tonder is a lecturer and Programme Manager: Executive Education at IIE MSA.
Her research interests focus on innovation, digital technologies, transformation, and business
models.
Bart Bossink is full professor of Breakthrough Technology Innovation, Vrije Universiteit,
Amsterdam, Netherlands. His research covers innovation and sustainability in corporate and
institutional organizations.
Prof Chris Schachtebeck is an Associate Professor and Head: Department of Business
Management at the University of Johannesburg. His research interests lie within entrepreneur-
ship and corporate entrepreneurship.
Cecile Nieuwenhuizen is a full Professor and the Chairperson of the SARChI Entrepreneurship
Education. Her research is focused on entrepreneurship development.
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The Effect of Digitally-Driven Business Model Innovation On Business Performance

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Journal of Small Business & Entrepreneurship

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The effect of digitally-driven business model

Chanté van Tonder, Bart Bossink, Chris Schachtebeck & Cecile

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The effect of digitally-driven business model innovation

ABSTRACT ARTICLE HISTORY

CONTACT Chante van Tonder chantevt@live.co.za Department of Business Management, University of

renouvellement strategique, sur la relation entre l’IME par la trans-

2. Literature review and hypothesis development

2.2. Business model innovation and business performance

Hypothesis 1 (H1þ): Business model innovation through digital transformation

2.3. Small and medium-sized enterprises

2.4. Moderators versus mediators

2.5. The moderating role of culture renewal

2.6. The moderating role of the organisational structure

Hypothesis 3 (H3þ): The organisational structure has a supporting moderating impact

2.7. The moderating role of strategic renewal

implementing a strategy, focusing on digital capability development, and providing

Figure 1. Research model and hypotheses.

4.2. Statistical analysis

Table 1. Demographics of respondents.

5.2. Exploratory factor analysis

Table 3. KMO and Bartlett’s test for independent variables.

measure of sampling adequacy and Bartlett’s test of sphericity, as presented in Table 3.

5.3. Regression analysis

Table 4. South Africa correlations.

Table 5. Netherlands correlations.

Table 6. Model summary of South African moderator interactions.

Table 7. Model summary of Netherlands moderator interactions.

5.4. Multivariate analysis of variance (MANOVA)

Table 8. Summary of hypothesis results.

Table 9. Estimated marginal means.

flexible organisational structure, cross-collaboration, openness towards change, adopt-

8. Limitations and avenues for future research

State of South African Small Business. 2022. Resilience Reimagined. https://www.xero.com/con-

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