Environmental Dynamism, Digitalization, and Digital Capability: Explaining Small Firms Performance in Ecuador

Despite growing interest in digital transformation among small and medium-sized enterprises, understanding how they use digital technologies to enhance competitiveness, partic-ularly in emerging markets, is still limited. Grounded in the resource-based view, resource orchestration theory, and digital transformation literature, this study explores how environ-mental dynamism influences firm performance, focusing on the mediating role of digitaliza-tion and digital capability in Ecuadorian companies. To test our hypotheses, we used structural equation modeling with survey data from 109 managers. Our findings indicate that digitalization and digital capability mediate the relationship between environmental dyna-mism and performance, emphasizing the need to integrate technological and managerial dimensions to face digital transformation. This topic is relevant because small firms face greater challenges for technological adoption.