The Effect of Digital Capability, Digital Orientation on Business Resilience with Digital Transformation as a Mediating Variable

Abstract

In the advent of information technology advancement, digitalization in business becomes pivotal in sustaining competitive advantage, especially for small scale enterprises. Notwithstanding the influx of digitalized business processes, their impact on business resilience is arguably impacted by other variables. This study is aimed at analyzing the influence of digital capabilities, and digital orientation on business resilience with digital transformation as a mediating variable. As a case in point, 380 small business owners in Greater Jakarta area are selected as respondents. The data was collected using a Likert-scale questionnaire that was distributed online. Data was analyzed using Smart PLS. The study finds that digital capabilities, digital orientation, and digital transformation as separate variables are significantly influenced by business resilience with digital capability showing the highest significance value. The digital transformation partially mediates the impact of digital capabilities and digital orientation on business resilience. The findings indicate the limited success of the Indonesian government initiatives in accelerating small businesses’ exposure to digitalization during the pandemic period. The next proposed recommendation would be to initiate efforts to increase digital transformation of small businesses since this variable comes across as the bridge between digitalization and business resilience. Keywords: Digital Capability, Digital Orientation, Business Resilience, Digital Transformation