PurposeBuilding on the theory of resource-based view (RBV), this paper is determined to explore the key drivers that drive platform ecosystem adoption by small businesses and mediation mechanisms that facilitate the translation of these drivers into improved firm financial and nonfinancial performance.Design/methodology/approachIn this study, structural equation modeling is used to analyze the data. A survey questionnaire was taken from 430 small businesses operating their businesses on various digital platform ecosystems in China to investigate the links between parameters by testing hypotheses. Digital startups operating their businesses on popular Chinese platform ecosystems, including Alibaba, Taobao, Jingdong, Maituan and HelloChe, were chosen.FindingsThe finding deciphers a nuanced interplay of the adoption drivers, with innovation capability emerging as a mediation mechanism translating these drivers into improved financial and non-financial performance.Research limitations/implicationsThe acknowledgment of potential drawbacks, such as the focus on specific drivers of platform ecosystem adoption, highlights the need for future research to explore additional factors that may influence adoption decisions. By examining institutional factors, market conditions or external shocks like the COVID-19 pandemic, researchers can provide a more comprehensive understanding of the complexities surrounding platform ecosystem dynamics and offer insights into adaptive strategies for businesses facing uncertainty.Practical implicationsThe outcome benefits policymakers and ecosystem designers by creating and overseeing platform ecosystems that support the highlighted drivers. This study further serves as a roadmap for both platform owners and prospective small enterprises as they map their path toward the digital frontier.Social implicationsThe findings from the research indicate that small enterprises that embrace platform ecosystems can experience improved financial and non-financial performance, which in turn promotes economic development and the generation of jobs. By utilizing innovative strategies and maximizing their strategic advantages, these enterprises can not only prosper but also make significant contributions to community development and help alleviate joblessness. This highlights the significance of assisting with the incorporation of digital technology in small businesses to achieve wider societal advantages.Originality/valueResearch originality lies in bridging the gap between strategic inputs and measurable outcomes, stressing the vital function of a firm’s innovation in turning ecosystem-driven opportunities into enhanced performance. This means the pivotal role of this study lies in exploring platform ecosystem adoption drivers based on the theory of RBV and the way innovation capability of platform ecosystems facilitates the translation of these drivers into improved financial and nonfinancial performance.
