Linking digital capability to small business performance: the mediating role of digital business transformation

Figures & data

Figure 1. Conceptual model.

Notes: Digital capability reflect to knowledge-based view; digital business transformation reflect to dynamic capability theory; and small business performance reflect to business performance theory.

Table 1. Respondent’s characteristics.

Characteristics	Description	Frequency	Percentage
Gender	Male	148	44%
	Female	182	56%
Business location	Malang City (urban)	118	36%
	Malang Regency (rural)	101	31%
	Batu City (urban)	111	34%
Business sector	Culinary	209	63%
	Craft	56	17%
	Fashion	65	20%
Year of establishment	<2000	74	22%
	2001–2010	66	20%
	2011–2019	190	58%
Using e-commerce	Yes	184	56%
	No	146	44%
Year of starting e-commerce (specific for 184 respondent uses e-commerce platform)	2000–2005	2	1%
	2006–2010	1	1%
	2011–2015	14	8%
	2016–2020	129	76%
	2021	24	14%

Table 2. Evaluation of the measurement model.

Construct	No. of items	Items deleted	Items	Loading	AVE	Cronbach’s alpha	CR (rho_a)	VIF
Digital capability (DC)	7	None	DC1	0.809	0.649	0.910	0.916	2.361
			DC2	0.788				2.184
			DC3	0.856				3.105
			DC4	0.843				2.682
			DC5	0.761				1.924
			DC6	0.772				4.590
			DC7	0.806				4.952
Digital business transformation (DT)	5	None	DT1	0.867	0.758	0.920	0.922	2.678
			DT2	0.867				2.714
			DT3	0.906				3.625
			DT4	0.906				3.641
			DT5	0.802				1.971
Financial performance (BP1)	5	2 (No. 1 and 2)	BP1.3	0.712	0.698	0.777	0.789	1.247
			BP1.4	0.881				2.560
			BP1.5	0.900				2.643
Flexibility performance (BP2)	4	None	BP2.1	0.788	0.675	0.843	0.896	1.924
			BP2.2	0.844				2.199
			BP2.3	0.874				1.933
			BP2.4	0.775				1.711
Quality performance (BP3)	4	None	BP3.1	0.805	0.675	0.842	0.868	1.778
			BP3.2	0.900				2.521
			BP3.3	0.748				1.895
			BP3.4	0.827				2.183

Table 3. Fornell-Lacker criterion to discriminant validity of the model.

Factors	Digital business transformation	Digital capability	Financial performance	Flexibility performance	Quality performance
Digital business transformation	0.871
Digital capability	0.778	0.806
Financial performance	0.560	0.548	0.835
Flexibility performance	0.571	0.522	0.619	0.821
Quality performance	0.646	0.582	0.648	0.684	0.822

Table 4. Heterotrait-Monotrait ratio (HTMT) criterion to discriminant validity of the model.

Factors	Digital business transformation	Digital capability	Financial performance	Flexibility performance	Quality performance
Digital business transformation
Digital capability	0.842
Financial performance	0.664	0.644
Flexibility performance	0.620	0.558	0.760
Quality performance	0.713	0.631	0.795	0.798

Table 5. Cross loading criterion to discriminant validity of the model.

Items code	Digital capability	Digital business transformation	Financial performance	Flexibility performance	Quality performance
DC1	0.809	0.645	0.482	0.408	0.484
DC2	0.788	0.521	0.505	0.401	0.417
DC3	0.856	0.692	0.478	0.495	0.560
DC4	0.843	0.743	0.502	0.470	0.560
DC5	0.761	0.626	0.386	0.398	0.413
DC6	0.772	0.547	0.324	0.358	0.375
DC7	0.806	0.570	0.385	0.388	0.432
DT1	0.660	0.867	0.522	0.462	0.572
DT2	0.668	0.867	0.463	0.480	0.526
DT3	0.691	0.906	0.494	0.530	0.589
DT4	0.707	0.906	0.525	0.542	0.598
DT5	0.657	0.802	0.428	0.468	0.520
BP1.3	0.370	0.468	0.712	0.538	0.567
BP1.4	0.495	0.436	0.881	0.471	0.487
BP1.5	0.500	0.498	0.900	0.543	0.571
BP2.1	0.321	0.378	0.487	0.788	0.537
BP2.2	0.365	0.432	0.464	0.844	0.554
BP2.3	0.598	0.617	0.575	0.874	0.629
BP2.4	0.339	0.375	0.489	0.775	0.505
BP3.1	0.563	0.573	0.565	0.552	0.805
BP3.2	0.550	0.631	0.578	0.632	0.900
BP3.3	0.284	0.382	0.435	0.507	0.748
BP3.4	0.449	0.482	0.527	0.545	0.827

Figure 2. Outer model (measurement model output).

Table 6. Path coefficient.

Hypothesis	Original sample (O)	Sample mean (M)	Standard deviation (STDEV)	T statistics (|O/STDEV|)	p-Values	Result
H1: Digital capability -> Digital business transformation	0.778	0.778	0.024	32.226	0.000	Supported
H2: Digital capability -> Financial performance	0.286	0.288	0.088	3.236	0.001	Supported
H3: Digital capability -> Flexibility performance	0.196	0.198	0.076	2.588	0.010	Supported
H4: Digital capability -> Quality performance	0.203	0.204	0.072	2.824	0.005	Supported
H5: Digital business transformation -> Financial performance	0.337	0.337	0.078	4.320	0.000	Supported
H6: Digital business transformation -> Flexibility performance	0.419	0.419	0.070	5.985	0.000	Supported
H7: Digital business transformation -> Quality performance	0.488	0.487	0.069	7.114	0.000	Supported

Notes: R² of digital business transformation = 0.61; R² of financial performance = 0.35; R² of flexibility performance = 0.34; and R² of quality performance = 0.43.

Table 7. Mediating effect of digital business transformation.

Hypothesis	Original sample (O)	Sample mean (M)	Standard deviation (STDEV)	T statistics (|O/STDEV|)	p-Values	Result
H8: Digital capability -> Digital business transformation -> Financial performance	0.379	0.379	0.055	6.904	0.000	Supported
H9: Digital capability -> Digital business transformation -> Financial performance	0.262	0.262	0.061	4.306	0.000	Supported
H10: Digital capability -> Digital business transformation -> Financial performance	0.326	0.326	0.055	5.967	0.000	Supported

Figure 3. Inner model (structural model output).

Data availability statement

Data sharing is not applicable to this article as no new data were created or analyzed in this study.