The Role of Digital Transformation in the Financial Performance of Small and Medium Enterprises in Vietnam

Abstract:

This study investigates the mediating role of digital transformation in the relationships between Attitude, Digital Literacy, Professional Leadership, and Financial Performance within Vietnamese Small and Medium Enterprises (SMEs). Employing Partial Least Squares Structural Equation Modeling (PLS-SEM) on survey data collected from 200 SMEs, the results demonstrate that: (1) Attitude exhibits both direct and indirect effects on Financial Performance; (2) Digital Literacy influences Financial Performance solely through the mediating role of Digital Transformation; (3) Professional Leadership directly affects Financial Performance without mediation. Digital Transformation acts as a partial mediator and significantly enhances Financial Performance. The model displays strong explanatory power, with R2 values of 0.435 (Digital Transformation) and 0.701 (Financial Performance). The findings suggest that SMEs should cultivate proactive attitudes, strengthen digital competencies, and optimize leadership capabilities to improve financial outcomes. A key limitation is the geographically restricted sample, highlighting the need for future research to broaden regional coverage and integrate moderating variables.