Strategic Decision-Making in SME Growth: Harnessing Digital Transformation and Innovation in Jordan

Purpose: This study investigates the strategic role of digital transformation (DT), digital innovation (DI), and digital strategy (DS) in enhancing the performance of small and medium enterprises (SMEs) in Jordan, a developing economy. The research focuses on the mediating influence of digital strategy in translating technological advancements into financial and non-financial organizational outcomes. Design/methodology/approach: A quantitative approach was employed, utilizing cross-sectional survey data from 117 SMEs. The study used partial least squares structural equation modeling (PLS-SEM) to examine the relationships among digital transformation, digital innovation, digital strategy, and firm performance. The model was validated with diagnostic tests for reliability, validity, and model fit indices. Findings: The findings reveal significant direct effects of digital transformation and digital innovation on digital strategy. Mediation analysis confirms that digital strategy partially mediates the relationships between digital advancements and performance. For financial and non-financial outcomes, digital strategy enables SMEs to leverage technological resources effectively. The study identifies the potential of strategic digital alignment for sustainable growth in resource-constrained environments. This research explicitly contributes to the field of Decision Sciences by modeling how SMEs optimize digital resources under uncertainty, linking decision-making processes with performance outcomes. Research limitations/implications: The cross-sectional design limits the ability to observe long-term impacts of digital strategies. Moreover, the sample is restricted to Jordanian SMEs, which may limit generalizability. Future longitudinal and cross-country studies are recommended to capture dynamic effects and comparative insights. Practical implications: The research highlights actionable strategies for SME leaders to adopt and align digital technologies with organizational goals. Policymakers are encouraged to design initiatives that support SMEs in overcoming technological and resource barriers. Social implications: Promoting digital transformation in SMEs fosters job creation, innovation, and economic stability, contributing to the broader socio-economic development of emerging economies. Originality/value: This study is original in its context-specific focus on SMEs in a developing economy and differs from prior literature by explicitly demonstrating how digital strategy mediates both financial and non-financial outcomes. By highlighting originality and explicitly situating digital strategy within the Decision Sciences paradigm, the paper shows how structured decision models can guide SMEs in resource-constrained environments.