OeconomiA

copernicana
Volume 14 Issue 4 December 2023
p-ISSN 2083-1277, e-ISSN 2353-1827
www.oeconomia.pl

ORIGINAL ARTICLE

Citation: Civelek, M., Krajčík, V., & Ključnikov, A. (2023). The impacts of dynamic capabili-
ties on SMEs’ digital transformation process: The resource-based view perspective. Oeconomia
Copernicana, 14(4), 1367–1392. doi: 10.24136/oc.2023.019

Contact to corresponding author: Mehmet Civelek, m_civelek@windowslive.com

Article history: Received: 13.02.2023; Accepted: 4.07.2023; Published online: 28.07.2023

Mehmet Civelek
Pan-European University, Czechia
orcid.org/0000-0002-1247-5308

Vladimír Krajčík
Pan-European University, Czechia
orcid.org/0000-0003-2234-3939

Aleksandr Ključnikov
Pan-European University, Czechia
orcid.org/0000-0003-0350-2658

The impacts of dynamic capabilities on SMEs’

digital transformation process: The resource-based
view perspective

JEL Classification: L26; L86; O32

Keywords: digital transformation; digital literacy; cyber-security; dynamic capabilities of the resource-
based view; SMEs

Abstract

Research background: SMEs’ concern for the digital literacy of their workforce, their interest
in increasing digital literacy among employees, and securing their digital platforms, have been
major issues in their digital transformation process. To reduce those obstacles, the dynamic

Copyright © Instytut Badań Gospodarczych / Institute of Economic Research (Poland)

This is an Open Access article distributed under the terms of the Creative Commons Attribu-
tion License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use,
distribution, and reproduction in any medium, provided the original work is properly cited.
 Oeconomia Copernicana, 14(4), 1367–1392

capabilities of SMEs included in the Resource-based View (RBV) might be an effective solution
since they help companies be more competitive and proactive against the threats they face in
the digitalization process.
Purpose of the article: This research aims to investigate whether SMEs' dynamic capabilities
positively contribute to their digital transformation process.
Methods: In line with the proposed relationships, this paper analyzes SMEs from Czechia by
running Ordinal Logistic Regression analyses. The research sample is created by stratified
random sampling and purposive sampling methods. The research data is collected via tele-
phone surveys.
Findings & value added: This research does not find a positive relationship between the
dynamic capabilities of SMEs and the digital transformation process. While the results related
to digital literacy are negatively associated with digital transformation, no significant relation-
ship exists between security actions and the digital transformation of SMEs. This paper ex-
tends the scope of RBV on the digital transformation of SMEs by analyzing various dynamic
capabilities of SMEs that have not been included in a sole study. Moreover, the perceptions of
SME executives are considered by this research to provide effective solutions for the problems
they face in digital transformation. Having a joint venture agreement with well-experienced IT
companies, having a network with partner firms, looking for funding opportunities in the EU,
participating in some practical training, and providing internships for bachelor students might
enable SMEs to hit their targets in digital transformation.

Introduction

Digital transformation has been a phenomenon process for companies to

manage their operations effectively. This process is crucial for businesses,
individuals, policymakers, and other institutions (Sun et al., 2022a; 2022b).
For this reason, the expenses for digital transformation technologies have
increased in the last five years and reached 1.85 trillion US dollars in 2022
(Statista, 2022).
Digital transformation can be identified as a process of using new tech-
nologies for business operations (Vial, 2019). Digital transformation also
causes organizational changes due to implementing digital technologies
into business processes (Warner & Wäger, 2019). In this regard, businesses
aim to be adapted to the changing conditions in the digital world that con-
sists of the Internet of Things (IoT), artificial intelligence, blockchain, ma-
chine learning (Cetindamar-Kozanoglu & Abedin, 2020), big data analytics,
mobile technologies, and other IoT tools (George et al., 2021). For instance,
the Internet of Things enables users to transfer data and communicate au-
tonomously using multi-device systems (Andronie et al., 2023). Thus, firms
that follow those trends and implement new strategies to change become
successful in the digital transformation process (Cetindamar-Kozanoglu &

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Abedin, 2020), which increases their competitiveness (Neumeyer et al.,

2020), innovativeness, performance, and productivity (Hwang & Kim,
(2022). Moreover, the digital transformation process makes businesses im-
plement the outcomes of Industry 4.0, including the creation of networks,
digital technologies, robotics, and 3D printing. This fact also increases
firms’ ability to make innovative business activities and to develop infor-
mation technologies (Małkowska et al., 2021). However, smaller firms, in-
cluding SMEs, face more obstacles in this transformation process due to
a lack of interest in the digital literacy of their employees and a lack of ac-
tivities regarding digital literacy and security (Oggero et al., 2020; Olleren-
shaw et al., 2021; Rupeika-Apoga & Petrovska, 2022).
Digital literacy is a competency that enables using digital tools such as
smartphones, laptops, and tablets (Neumeyer et al., 2020). Digital literacy is
also an ability to access, manage, examine, and assess information to create
new knowledge and contact with other users (Sariwulan et al., 2020).
Awareness (Ključnikov et al., 2020a) and knowledge of entrepreneurs re-
garding technological developments can enable them to quickly adopt digi-
tal tools (Oggero et al., 2020). Moreover, digitally literate people become
able to explore new processes, business models, and customer-based solu-
tions that allow businesses to increase their competitiveness and innova-
tiveness. Digital innovations substantially support the regional develop-
ment of structurally disadvantaged industrial regions (Ključnikov et al.,
2020b). The easier adoption and usage of digital technologies can be
achieved via digital literacy (Neumeyer et al., 2020). Cyber-security activity
is another barrier that might affect the digital transformation process of
SMEs. Cybersecurity can be defined as procedures that individuals, busi-
nesses and organizations might implement to protect and secure their pri-
vacy and data when using information technology (Rupeika-Apoga & Pe-
trovska, 2022). Problems in the cybersecurity of businesses can create more
cost and negatively impact firms’ operations and reputation (Yudhiyati et
al., 2021). It is also crucial for the digital competitiveness of companies,
because when companies reduce their security concerns by taking actions
for the security of digital technologies, their usage and adoption of new
technologies increase (Lutfi et al., 2022).
Firms improving their dynamic capabilities can reduce those digital lit-
eracy and security barriers and become more successful in digital trans-
formation, because firms having those abilities can easily take the required
actions in their digital transformation process. According to some studies,

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firms with improved dynamic capabilities have achieved more success in

implementing digital technologies in their operations (Warner & Wäger,
2019). Dynamic capabilities belong to the Resource-based view since it ena-
bles firms to use their resource-based characteristics for survival (Vial,
2019; Danneels, 2012). Those capabilities also make firms gain competitive
advantages against their rivals (Lutfi et al., 2022) and increase their profita-
bility (Danneels, 2012). Dynamic capabilities also stimulate the develop-
ment of organizational abilities of businesses that firms need in changing
conditions (Wai et al., 2020).
Moreover, the executives are interested in improving the digital literacy
of their workers and digital security aspects of SMEs to guarantee and pro-
tect the digital transformation process of their businesses, while those dy-
namic capabilities and activities are related to the abilities of companies to
effectively use their human and technological resources (Neumeyer et al.,
2020). This fact has also been confirmed by several researchers who define
the digital literacy of employees and security actions of companies as the
dynamic capability of businesses (Vial, 2019; Warner & Wäger, 2019;
Cetindamar-Kozanoglu & Abedin, 2020). In this regard, this paper aims to
investigate the impacts of the dynamic capabilities of SMEs on their digital
transformation process. Thus, the research question is: “How do SMEs’
dynamic capabilities affect their digital transformation process? “. To inves-
tigate the impacts of dynamic capabilities on digital transformation, the
researchers selected a sample that consisted of 330 SMEs from Czechia,
created data by performing telephone surveys, and analyzed the research
data by running Ordinal Logistic Regression analyses.
According to Eurostat EU’s Digital Intensity Index (2021), 56% of SMEs
in EU countries reached the basic level of digital intensity, while Czechia
has a better ranking than most of the EU members. Moreover, Czech SMEs
have better rankings in most digitalization parameters than SMEs of Vise-
grad countries (Esses et al., 2021). However, Czechia ranks 19 among the
EU members regarding the Integration of digital technologies that include
some actions such as electronic information sharing, the usage of social
media, big data, cloud, artificial intelligence, e-invoices, and online sales
(European Commission, Digital Economy, and Society Index, DESI, 2022).
Furthermore, 76% of Czech enterprises faced obstacles when hiring ICT
specialists to fulfill related positions; this rate is the highest among EU
members, while the average is 55% (European Commission, DESI, 2022).
According to the European Union’s Eurobarometer Index (2021), 28% of

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European SMEs have faced cybercrime issues at least once in 2021. Czech
SMEs have more intensively perceived these issues than the EU average. In
this regard, it will be noteworthy to analyze the impacts of digital literacy
activities, cyber security, and digital literacy concerns of SMEs on their
digital transformation process and to find solutions for these issues. For
this reason, prospective readers will be interested in reading the outcomes
of this unique research.
This paper makes three contributions to the literature and the theory.
First, this paper defines the scope of major obstacles that SMEs face in the
digital transformation process by including three main issues in a study.
Many researchers have separately examined enterprises' major issues in the
digital transformation process (Rupeika-Apoga & Petrovska, 2022; Lutfi et
al., 2022), and do not concentrate on the SMEs segment (Oggero et al., 2020;
Ollerenshaw et al., 2021). Thus, this study emphasizes the main challenges
of the digital transformation process in the context of SMEs. Second, this
paper extends the RBV theory's scope to SMEs' digital transformation pro-
cess. Many researchers have already analyzed the importance of dynamic
capabilities in companies' digital transformation (Warner & Wäger, 2019;
Vial, 2019). However, those researchers separately analyze the impacts of
dynamic capabilities on digital transformation. This paper is the first one
that focuses on three crucial dynamic capabilities of SME executives and
SMEs, such as their concern for the digital literacy of their workers, digital
literacy, and cyber security activities of SMEs. Since these capabilities are
related to the firms’ human and technological resources, this paper brings
SMEs' human and technological sources together. It looks at their impacts
on the digital transformation process. Another contribution lies in the focus
on the perceptions of firms’ executives regarding the analyzed variables.
Since managers and owners take very active roles in SMEs’ management,
the authors believe that the executives’ directives for their employees’ digi-
tal literacy and the executives’ decisions for companies’ security and digital
literacy activities in the digital transformation process might be more un-
derstandable from the executives’ point of view.
The remaining part of the article is structured in the following sequence.
First, the empirical results of previous studies and the research hypotheses
will be expressed in the Literature Review section. Next, the details regard-
ing methodological approaches, sample characteristics, data collection, and
analyses will be clarified in the Research Methods section in detail. Then,
the researchers will explain the paper's results with the hypotheses testing

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in the Results section. In the fourth section, the researchers will discuss the
results and provide some policy implementations and solutions for SMEs
regarding the problems of their digital transformation process. Lastly, the
researchers will conclude the most important points of this research and
define the limitations of the research, and make recommendations for fur-
ther studies.

Literature review

A lack of digital literacy and digital skills of employees has been identified
as a major barrier in the digital transformation process of SMEs (Rupeika-
Apoga & Petrovska, 2022; Lutfi et al., 2022). Furthermore, a lack of digitally
literate workers is also an alarming issue in implementing effective digital
technologies into work operations (Weill et al., 2019). Ollerenshaw et al.
(2021) analyze Australian SMEs and highlight that a lack of digital skills
causes many issues for those firms to adopt digital technologies. Similarly,
Neumeyer et al. (2020) also interpret that when the literacy of employees is
lower, companies have a lower degree of absorptive capacity and face
higher costs and risks in their operations. Moreover, firms that ignore the
digital literacy of workers fail in digital transformation (Murawski & Bick,
2017; Nadeem et al., 2018). By observing Polish SMEs, Ziółkowska (2021)
claims that insufficiently skilled employees lacking technical knowledge
are one of the barriers for SMEs in their digital transformation process.
Krajčík (2021) also emphasizes the issues in Czech SMEs’ digital transfor-
mation process, such as the shortage of skilled employees.
Top management support is crucial to avoid such an issue (Lutfi et al.,
2020; Lutfi et al., 2022). By being aware of the digital literacy of their work-
ers, firms can implement a data-driven approach to direct their workers for
the tasks that employees aim to achieve. For instance, Amazon has applied
this approach that enables this company to assess their workers’ perfor-
mance and collaborations. For these reasons, companies that run such ap-
proaches can be more effective in the decision-making process to direct,
manage and motivate their employees (Westerman, 2016). By analyzing
Hungarian and Slovakian SMEs, Saáry et al. (2022) report that SMEs both
countries know the need to implement new business models in digital
transformation. Moreover, managers who understand the digital literacy of
their workers can also do some activities to train their workforce (Cetin-

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damar-Kozanoglu & Abedin, 2020). In this regard, Bolek et al. (2018) ana-
lyze Slovakian managers and verify that managers' interest in creating ed-
ucational activities can increase information literacy. However, Krajčík
(2021) analyzes Czech SMEs and elucidates that Czech SMEs’ awareness
regarding digitalization is not enough. Furthermore, Lutfi et al. (2020) ana-
lyze SMEs from Jordan and declare that SMEs’ decision-makers showing
more concern for supporting their workers’ literacy increase the adoption
success of artificial intelligence solutions by firms. Cruz-Jesus et al. (2019)
investigate some SMEs from Portugal and express that the top manage-
ment needs to prioritize integrating the technologies by their workers to
ease their CRM adoption. Similarly, Jahanshahi and Brem (2017) examine
some Iranian SMEs and verify that top management teams’ behavioral
integrity may create an effective environment for their workers to imple-
ment more innovative solutions for their business operations. In this re-
gard, firms showing more concern about the digital literacy of their work-
ers can gain more advantages than others that do not, because firms put-
ting more emphasis on the digital literacy of their workers can take efficient
actions to improve the capabilities of their workers. Due to having those
arguments, a research hypothesis might be set as follows:

H1: There is a positive relationship between digital literacy concerns and the digi-
tal transformation of SMEs.

To reduce their digital literacy concern, company executives need to

care about their workforce’s digital skills and take some effective actions to
stimulate digital literacy among their employees (Cetindamar-Kozanoglu,
& Abedin, 2020). Since the strategic decision-making process is highly de-
pendent on the executives in SMEs, their actions to develop their workers'
digital literacy ease SMEs' digital transformation process (Hassan et al.,
2020). For instance, company executives, such as owners or managers, can
create a support system that increases firms' digital adoption success and
motivates their work for technological changes (Lutfi et al., 2022). By ana-
lyzing Czech SMEs, Dvoráková et al. (2021) infer that a lack of trained em-
ployees is one of the obstacles to SMEs in adapting digital technologies;
therefore, firms make outsourcing activities to overcome this barrier.
Ollerenshaw et al. (2021), through the analysis of the firms in Australia,
highlight that training activities created by companies can accelerate their
digital transformation process. Šimberová et al. (2022) analyze Czech SMEs

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and explain that effective knowledge management of SMEs can accomplish

the digital transformation process. Wirawan et al. (2021) also examine SMEs
in Indonesia and surmise that the organizational learning activity of SMEs
for digital literacy develops their competencies and increases the perfor-
mance and innovations of those businesses. Similarly, Kő et al. (2022) exam-
ine Hungarian SMEs and explain that to increase the digital readiness of
firms, SMEs need to improve their organizational capabilities by stimulat-
ing the digital capabilities of the workforce.
Skare et al. (2023) observe SMEs from European countries, including
Czechia, Slovakia, Hungary, and Poland, and state that human resource
activities, including design and integration of digital transformation pro-
cess, are crucial for those companies. Lutfi et al. (2022) confirm the positive
association between top management support, organizational readiness,
and the adoption of big data analytics by analyzing Jordanian SMEs. Simi-
larly, Alshamaila et al. (2012) investigate SMEs in England and declare the
positive effect of top management support on the cloud-computing adop-
tion of those enterprises. Cruz-Jesus et al. (2019) also confirm the positive
relationship between top management support and CRM adoption in Por-
tuguese firms. By analyzing Slovakian SMEs, Bolek et al. (2018) state that
firms need to implement remuneration and business practices to increase
the literacy level of their workers. The empirical findings of those studies
enable this research to set another hypothesis as follows:

H2: There is a positive relationship between digital literacy activities and the digi-
tal transformation of SMEs.

Another obstacle in adopting new technologies, such as IT systems se-

curity, has been highlighted by Dvoráková et al. (2021), who analyze Czech
SMEs. Security has also been a concern for SMEs from other countries in
their digital transformation process (Mendhurwar & Mishra, 2021; Rupei-
ka-Apoga et al., 2022; Gaitero et al., 2021). When the trust of executives de-
creases, they might have a lack of intention to adopt new technologies
(Ključnikov et al., 2020c). Viruses, worms, trojans, software bombs, sabo-
tage of services, and cyber attacks by hackers are the threats (Mendhurwar
& Mishra, 2021) that cause fraud and cybersecurity issues for SMEs and
increase their security concerns (Bertoni et al., 2022). Data security risk,
high degree of uncertainty, untraceable transactions, and information leak-
age that digital platforms might include have been some of the reasons for

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the security concerns of SMEs (Carcary et al., 2014; Hassan et al., 2020).
Krajčík (2021) examines Czech SMEs and surmises that a lack of sufficient
tools concerning cyber-security, problems in high-speed internet access,
and the deterioration of regulatory standards, including intellectual prop-
erty rights, might be other reasons for the digital security concerns of
SMEs.
All those factors are the major threats affecting SMEs' digital transporta-
tion process. SME executives can negatively perceive those factors and
become reluctant to apply digital technologies. For these reasons, firms
implementing cybersecurity protections in their digital networks and pro-
grams can be more successful in digital transformation. In this regard,
Maroufkhani et al. (2020) examine Iranian SMEs and state that security
affects the digital transformation process of SMEs, including big data adop-
tion. By analyzing Slovakian SMEs, Bolek et al. (2018) infer that firms need
to improve their workers’ abilities by providing education for information
security. Skafi et al. (2020) also analyze Lebanese companies and verify that
a positive relationship exists between the security actions of firms and their
adoption of big data. Moreover, Lutfi et al. (2020) investigate Jordanian
SMEs and confirm that insecure feelings have a negative impact on the
adaption of big data analytics. On the other hand, Hassan et al. (2020) ex-
amine German SMEs and vindicate that security is one issue that decreases
SMEs’ technology adoption. Thus, firms taking steps for cybersecurity is-
sues are more likely to gain success in their digital transformation process.
These pieces of evidence enable this paper to set another hypothesis as
follows:

H3: There is a positive relationship between cyber-security activities and the digi-
tal transformation of SMEs.

Research methods

This research aims to determine whether or not SMEs' dynamic capabili-

ties, such as their concerns for the digital literacy of their workers and for
digital literacy and cyber-security activities, positively affect their digital
transformation process. Before collecting the data, the research team per-
formed a pilot telephone survey and directed questions to a sample that
consisted of 20 respondents. The research team aimed to increase the con-

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struct's response rate, validy, and reliability by doing so. This pilot survey
was implemented in the Moravian-Silesian Region of Czechia. The research
team revised the questionnaire depending on the respondents' comments
in this pilot survey. Thus, some phrases that might cause misunderstand-
ings and grammatical errors were changed in line with the respondents'
comments. The number of firms included in the sample was determined
depending on the proportion of the active SMEs in the Moravian-Silesian
Region of Czechia to the total number of SMEs operating in the Czech Re-
public. The ratio information was gained from the Czech Statistical Office.
The sample is purposively selected based on the size, sector, and geograph-
ical coverage. Then, the research team called 330 owners and managers of
SMEs. Thus, the respondents were the executives of those businesses.
The survey consists of various questions that aim to discover SMEs'
characteristics and assess those enterprises' digital literacy, digital trans-
formation, digital capabilities, and digital adoption. To hit this paper’s
target, the researchers used four survey questions presented in Table 1. For
example, when the researchers asked digital literacy activities of SMEs, the
scholars directed the respondents to think about their companies‘ training
activities for employees, companies‘ collaborations with mentors, and
companies‘ communications with their workers. Moreover, the respond-
ents are informed about digital literacy, including employees' abilities re-
garding using computers, information, media, communication, and cyber-
security systems.
To scale the responses of survey participants, the researchers applied
a four-point Likert Scale. The scale used for independent variables of the
research models, namely, digital literacy of employees, digital literacy, and
cyber-security activities of SMEs, is as follows: “1-strongly disagree”, “2-
disagree”, “3-agree”, “4-strongly agree”. Thus, the higher volumes indicate
more concerns of SMEs regarding digital literacy and digital security issues
of their companies. Regarding the dependent variable of the research mod-
els, namely, digital transformation, a four-point Likert scale is applied by
the researchers as follows: “1-very poor”, “2-poor”, “3-good”, and “4-very
good” and “4-very good” is the reference level of the dependent variable.
As mentioned above, the research models' dependent and independent
variables are scaled by a four-point Likert Scale and ranked. For this rea-
son, the researchers use Ordinal Logistic Regression Analysis in SPSS sta-
tistical program within the logit function. According to Harrell (2015), or-
dinal regression has an algorithm that evaluates continuous and latent

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variables. The algorithm also shows the changes in cutoffs of dependent

and independent variables. Cutoffs can also be called levels in those varia-
bles, and a four-point Likert scale consists of three cutoffs for the inde-
pendent variables as follows: Cutoff 1 represents the responses between
“strongly disagree“ to “disagree, “while Cutoff 2 shows the responses be-
tween “disagree“ to “agree. “ Finally, Cutoff 3 indicates the answers be-
tween „agree“ to „strongly agree. “ A similar approach is also used for the
cutoffs of the dependent variable. All those levels (cutoffs) are also present-
ed in Table 4, Table 5, and Table 6, which indicate the results of the 1st,
2nd, and 3rd research models, respectively. The models are formulated as
follows:

≤ =β +β (1)

where:
Y Dependent variable (Y1: Digital transformation, same in all research mod-
els)
J Categories j=1 refers to “1-very poor”, j=2 refers to “2-poor”, j=3 refers to
“3-good”, and j=4 refers to “4-very good”.
X1 Independent variable (X1: Digital Literacy concern of SMEs in the 1st re-
search model, X1: Digital Literacy activities of SMEs in the 2nd model and
Cyber-security activities of SMEs in the 3rd research model)
Βj1 Regression coefficients, β0 = Constant term, P = Probability.

A 5% significance level is used to test the research hypotheses and the

assumptions of Ordinal Logistic Regression. In the case of having P values
that are lower than the selected level of significance, the researchers will
support the hypotheses. As already set in Literature Review section, the
hypotheses assume a positive relationship between the dependent and
independent variables. Thus, null hypotheses assume the opposite, a nega-
tive or non-existence of the relationship between the dependent and inde-
pendent variables.
On the other hand, the researchers also analyze the assumptions of Or-
dinal Logistic Regression by considering the volumes from Model Fitting,
Goodness of Fit, and Test of Parallel Lines indicators that are depicted in
Table 2. As indicated in Table 2, P values (“Sig.“ in the table) of the re-
search models for the Model Fitting indicator are lower than the 5% signifi-
cance level (0.000 for all of the research models). This result confirms that
when an independent variable is added to a research model of this paper,

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the research models become capable of making better predictions for the
dependent variables. In other words, the financial literacy of employees,
financial literacy, and cyber-security activities of SMEs are good at predict-
ing the changes in the digital transformation of those enterprises. The val-
ues from Cox&Snell and Nagelkerke statistics are also presented in Table 2
to indicate the overall model fit. Both indicators represent the percentage of
the changes in the dependent variable. For instance, when the digital litera-
cy of employees is included in the first research model, this independent
variable represents 17.7% (the volume from the Nagelkerke indicator) of
the changes in the digital transformation of SMEs. Similar explanations can
also be made for the second (20.4% of the variabilities in digital transfor-
mation can be explained by the addition of digital literacy activities of
SMEs into the second model) and the third research models (40.6% of the
changes in digital transformation have occurred due to adding cyber-
security activities of SMEs into the third research model).
Another indicator included in Table 2 is the Test of Parallel Lines, which
measures whether the slope coefficients of the three cutoffs are similar.
Unlike testing Model Fitting, P values (“Sig.“ in the table) must be higher
than the 5% significance level to verify this assumption. P values for the 1st
and 2nd, and 3rd research models are greater than this significance level
(0.056, 0.135, and 0.334, respectively). The results from Model Fitting,
Goodness of Fit, and Test of Parallel Lines prove that this paper does not
invalidate the assumptions of the Ordinal Logistic Regression Test; there-
fore, it is suitable to use this test for data analyses.
Table 3 illustrates the sample profile that includes 330 SMEs working in
both manufacturing (165 firms, 50% of the entire sample) and service (165
firms, 50% of the entire sample) industries. Concerning the firm size, 110
firms (33.33% of the whole sample) are categorized under micro-segment,
while 110 businesses (33.33% of the whole sample) are categorized under
small-sized enterprises. The remaining 110 enterprises (33.33% of the whole
sample) are larger than the others; thus, they are classified as medium-
sized enterprises. Other details regarding the characteristics of the re-
spondents are also presented in Table 3.

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Results

The results of this paper regarding 1st research model are presented in
Table 4. As indicated in this table, p values (“Sig.“ in the table) for the cut-
offs of the independent variable (digital literacy concern of SMEs) are lower
than the 5% level of significance (p values < 0.005). Hence, SMEs‘ concern
for the digital literacy of their workers is a significant predictor of digital
transformation. However, since the coefficients of the cutoffs (Estimate in
the table) are negative (-2.161, -2.173, and -1.091, respectively), SMEs hav-
ing lower volumes from the independent variable of the first research
model are more likely to have a higher stage in the digital transformation
process. In this regard, a negative association exists between the concerns
of SMEs regarding their employees‘ digital literacy and their digital trans-
formation. For this reason, this paper fails to support the H1 hypothesis
that assumes a positive association among those variables.
Odds ratios are also presented in Table 4 to indicate the changes in odds
when a unit change in the SMEs’ concern for digital literacy occurs. The
odds ratio also refers to “how many times higher the odds of occurrence
are for each one-unit increase in the independent variable” (Ho, 2013). Fur-
thermore, it also evaluates the strength of the relationship between SMEs’
digital literacy concerns and digital transformation. Since the coefficients of
the cutoffs are negative, one unit decrease (from cutoff 3 to cutoff 2) in
SMEs’ digital literacy concern 0.336 times greater the odds of occurrence to
have a higher level in the digital transformation process for SMEs with
a 95% confidence interval between -1.578 to -0.605. Thus, having a higher
stage in digital transformation process 0.336 times is likely to occur for
SMEs with lower digital literacy than those with more concerned SMEs.
On the other hand, odd ratios can be interpreted by another indicator. If
the odd ratio is higher than 1, the odds of the event is more likely to occur
when the predictor variable increases. Since 0.336 is lower than 1, being in
a greater stage of the digital transformation process is less likely to occur
when SMEs’ concern for digital literacy increases.
Concerning the results of the 2nd research model, Table 5 is depicted in
Annex. P values for the cutoffs of the digital literacy activities of SMEs (the
independent variable of the 2nd research model) are lower than a 5% level
of significance as presented under the column of “Sig.“ (Litactofcom = 1:
0.000, Litactofcom = 2: 0.0000, Litactofcom = 3: 0.0019). Thus, the digital
literacy activity of SMEs is a significant variable in predicting digital trans-

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formation. However, the coefficients (Estimate in the table) of the cutoffs of

this independent variable are negative (-2.547, -1.711, and -0.626, respec-
tively). In this regard, higher volumes from this indicator indicate lower
success levels in the digital transformation of SMEs; therefore, the analyses
confirm a negative relationship between the digital literacy activities of
SMEs and their digital transformation process. Due to this result, this paper
fails to support the H2 hypothesis that presumes a positive relationship
between the second research model's dependent and independent varia-
bles.
When it comes to the volumes of the odds ratio in Table 5, since the co-
efficients of the cutoffs are negative, a decrease in SMEs’ digital literacy
activities by one unit (from cutoff 3 to cutoff 2), 0.535 times increases the
odds of occurrence to have a higher digital transformation stage for SMEs
with a 95% confidence interval between -1.151 to -0.102. Since 0.535 is lower
than 1, when the digital literacy activities of SMEs increase, the odds of
being in a higher success level of digital transformation decrease for them.
Thus, SMEs with lower digital literacy activities are more likely to be in a
greater stage of digital transformation than SMEs with more digital literacy
activities.
Regarding the results of the 3rd research model, Table 6 is illustrated in
Annex. Different from the previous results, P values for the cutoffs of the
independent variable (namely, cyber-security activities of SMEs) are not
significant (Security = 2: 0.360 > 0.05, Security = 3: 0.272 > 0.05). This result
confirms that the cyber-security activities of SMEs do not affect their digital
transformation process since this variable is not a significant predictor of
the dependent variable. For this reason, a positive association between the
cyber-security actions of SMEs and their digital transformation process
does not exist. Hence, the H3 hypothesis is not supported.

Discussion

As already substantiated by the analyses, this research does not confirm the
positive association between the dynamic capabilities of SMEs (including
digital literacy concern of SMEs, digital literacy, and cyber-security activi-
ties of SMEs) and their digital transformation process. Therefore, the results
of this paper are not compatible with the studies of Murawski and Bick
(2017), Nadeem et al. (2018), Bolek et al. (2018), focused on digital literacy

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concern-digital transformation relationship, Lutfi et al. (2022), Alshamaila et

al. (2012), Cruz-Jesus et al. (2019), Ollerenshaw et al. (2021), focused on digi-
tal literacy activities-digital transformation relationship, Hassan et al.
(2022), Skafi et al. (2020) focused on security activities-digital transfor-
mation relationship, that analyzes enterprises from various markets such
Germany, Slovakia, Lebanon, England, Australia, and Portugal. As already
mentioned in Literature Review section, those studies confirm the positive
association between digital literacy concern, digital literacy, and security
activities of SMEs and their digital transformation, respectively. Moreover,
this paper’s results are not parallel with the results of Skare et al. (2023)
since the researchers substantiate the positive association between digital
transformation and digital literacy concerns of SMEs operating in some
other European countries such as Austria, Belgium, Croatia, Denmark,
Finland, France, Greece, Ireland, Italy, the Netherlands, Poland, Portugal,
Spain, and Sweden. By analyzing Chinese enterprises, Lei et al. (2023) also
verify the positive association between workers’ digital literacy and digital
transformation; therefore, this study also opposes the findings of Lei et al.
(2023). These scholars support their findings with a strong argument, that
is, the existence of strong government support, including subsidies.
The reason why this paper differs from other studies and does not find
any positive relationship between digital literacy, security activities, and
digital transformation might be related to the efficiency of the activities that
the examined SMEs have done. Czech SMEs have a very fragile structure
regarding financing; thus, they more intensively perceive financial risk
because of having high rejection rates, especially in the last few years
(OECD, 2022). For this reason, SMEs in this study might be reluctant to
invest substantially in digital literacy and cyber-security activities. As
a result, their digital literacy and security activities budget might not have
been enough to stimulate and develop their digital transformation process.
For instance, SMEs can seek support from EU programs created for en-
terprises' digital transformation. According to European Commission
(2022), seven main EU budget programs provide financial and educational
support for the digital transformation of SMEs, namely, Digital Europe
Programme, Horizon Europe, Connecting Europe Facility — Digital, Inves-
tEU, Creative Europe MEDIA, EU4Health, Recovery, and Resilience Facili-
ty. In this regard, using those opportunities, SMEs can directly apply or
look for options to increase and stimulate their digitalization process.

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Although Czech SMEs rank first in social media usage, e-commerce

sales, and functionalities of websites in comparison with other Visegrad
countries (Esses et al., 2021), more political implementations need to be
generated by policymakers. In this regard, Czechia has collaborations with
European Union regarding digitalization. Mutual actions concerning cy-
bersecurity, the usage of new technology, the protection of data, high-
speed internet infrastructure, and the developments in artificial intelligence
have been taken by both parties. Moreover, the Czech government has
prepared strategic documents that certify the developments in digitaliza-
tion and Czechia’s directives in line with the EU trends. According to the
strategic plan, SMEs need to effectively manage digital literacy issues in
their organizations to minimize the threats in the digital transformation
process. In this regard, Czech SMEs can stay competitive and accelerate
their digitalization process. Furthermore, the digital skills of workers also
need to be improved by the initiatives of SMEs (Šimberová et al., 2022).
On the other hand, Ližbetinová et al. (2019) observe Slovak SMEs and
remark on the positive effect of CRM implementation by SMEs on their
sustainability. The researchers also profess that similar results can be
gained from the Czech and other European SMEs operating in similar eco-
nomic environments. Since Visegrad countries’ business environments are
quite similar (Oláh et al., 2019; Ključnikov et al., 2022), the EU's support
might also provide benefits for Czech SMEs and for Slovak, Hungarian,
and Polish SMEs. For instance, European Union also motivates SMEs to
make joint investments in digital innovation. Moreover, the creation of
digital innovation centers, standardization of information and communica-
tion technologies, implementation of appropriate regulations regarding
cyber-security of systems, and improvements in digital skills of the work-
force are some of the aims that the European Union wants to achieve
among member states (Krajčík, 2021). The European Union also provides
encouragement for the digital transformation process of SMEs and the us-
age of its tools by SMEs and aims to accelerate this process in line with the
Green Deal for Europe concept. In this regard, European Commission also
supports digital transformation for green transformation that targets a cli-
mate-neutral Europe by 2050 (Šimberová et al., 2022). For these reasons,
SME executives need to be aware of those opportunities to reduce their
security and digital literacy concerns by also receiving required financial
sources from those institutions.

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On the other hand, the reason this paper differs from other studies re-
garding the relationship between SMEs’ concerns for the digital literacy of
their employees and digital transformation might be related to the experi-
ence of the executives analyzed in this research. The experience not only
enables executives to be more concerned and interested in their workers’
abilities but also causes increases in knowledge sharing among workers
and executives to adopt new technologies (Hassan et al., 2020). Moreover,
experience makes businesses take effective actions to adopt new technolo-
gies (Afolayan & de la Harpe, 2020). Since 63.64% of the respondents in the
research data have less than ten years of experience, this fact can be a good
argument for why this study differs from other studies by confirming the
negative association among those variables. Therefore, more practical and
detailed training needs to be provided for the executives to increase their
digital transformation experience of executives.
According to the Eurostat Basic Digital Skills statistic (2021), 54% of
people between 16 to 74 years old in Europe have basic digital skills. How-
ever, although the volume of Czechia is greater than the average (around
60%), the country stays behind many European countries, including Den-
mark, the Netherlands, and Finland. Moreover, although the ranking of
Czechia in the level of country preparedness to exploit digital transfor-
mation index is 29 around the world, the country’s ranking for training and
education is 38 (IMD World Digital Competitiveness Ranking Report,
2022). In this regard, policymakers need to emphasize the development of
practical training and theoretical courses for company executives.

Conclusions

Since SMEs lack financial assets and financial resources compared to their
larger rivals, the development of digital literacy among their workers and
the securitization of their digital tools seem to be a rocky road in their digi-
tal transformation process. In this regard, SMEs’ dynamic capabilities, such
as their interest in their employees’ digital literacy and their activities re-
garding the security of digital tools, need to be investigated in detail to
provide solutions for the obstacles of the digital transformation process.
For these reasons, this paper tries to find out the positive impacts of dy-
namic capabilities on the digital transformation of SMEs.

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This paper uses data from 330 SMEs located in Czechia. Telephone sur-
veys collected the data to achieve the research’s aim. Moreover, this paper
applies purposive and stratified random sampling methods to create the
research sample. Finally, the researchers performed all the analyses by
running Ordinal Logistic Regression Test in the SPSS program.
According to the results, this paper does not find a positive relationship
between SMEs' digital literacy and security activities and their digital trans-
formation process. The reason for that might be related to their funding
opportunities. Besides looking for EU support, SMEs can have a joint ven-
ture agreement with a company with greater financial power, more digital
literacy training, and some other activities to secure transactions via digital
tools. With such a collaboration, SMEs receive financial and security sup-
port from their partners. Partner companies can also create a network to
increase digital literacy among their employees.
On the other hand, this paper confirms the non-existence of a positive
association between SMEs’ concerns for the digital literacy of their employ-
ees and their digital transformation process. The experience of SME execu-
tives might be a strong argument to explain this result. In this regard, gov-
ernments can collaborate with universities to provide training for company
executives. Pieces of training can focus on developing the executives’ skills,
personal attitudes towards technological developments, the usage, and
understanding of executives regarding new digital technologies, and inter-
est in new technological trends that SMEs can implement for their opera-
tions. Moreover, managers and owners of SMEs can be trained for the ob-
stacles that they might face during the adoption of new technologies and
can be informed of the solutions to overcome those barriers. Valuable train-
ing, such as trials of some programs that SMEs might use for their opera-
tions, can be included in the executives' courses. SMEs can also collaborate
with universities and provide internship programs for students who study
information technologies and are good at IT programs. After the students'
graduation, SMEs can hire them to increase digital literacy in their busi-
nesses. By taking such actions, SMEs can reduce their cyber-security and
digital literacy concerns.
This paper brings various dynamic capabilities of SMEs into a study
and looks at their impacts on digital transformation. Moreover, this paper
also conceptualizes the major obstacles SMEs face in digitalization. By
highlighting these barriers, this research also provides alternative solutions
for SMEs to adopt the technologies used in the digitalization process easier

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and quicker. However, although this paper contributes to the RBV theory
and provides some initiatives that policymakers and SMEs can take, this
paper has some limitations. For instance, this paper is only limited to the
dynamic capabilities of RBV, the perceptions of company executives, and
the non-financial data of SMEs from a European country. For these reasons,
further studies can also include organizational capabilities and financial
statements of SMEs and larger enterprises from various countries in their
research. By doing so, new studies can make both country-level and firm-
level comparisons. Moreover, having financial statement analyses can
make further studies to indicate the financial issues of SMEs in detail. On
the other hand, the survey that this study applies aims to analyze the gen-
eral perspective of firm executives regarding digital transformation, digital
literacy, and cyber security of their businesses. In this regard, new studies
can extend such surveys by including more specific questions about the
particular aspects of cyber security, digital literacy, and digital transfor-
mation to enlarge enterprises’ digitalization.

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Annex

Table 1. Variables and measurements

Variables Measurements
Digital Transformation “ What is your company's digital transformation phase in the digital
transformation process?”
Digital Literacy concerns “ The digital literacy of employees is important for your company.”
of SMEs
Digital Literacy activities “ The steps/activities being taken in your company to increase employees'
of SMEs digital literacy level. “
Security Activities of “ You are dealing with cyber security issues connected to digital
SMEs transformation. “

Table 2. The assumption testing for ordinal logistic regression models

Goodness of fit
Assumptions Model fitting Test of parallel lines
Pseudo R-square
Models -2 Log Chi- Cox & -2 Log Chi-
likelihood Square df Sig. Snell Nagelkerke likelihood Square df Sig.
Model 1 117.351 58.678 3 0.000 0.163 0.177 58.672 12.299 6 0.056
Model 2 131.789 68.607 3 0.000 0.188 0.204 63.182 10.018 6 0.135
Model 3 219.850 154.458 3 0.000 0.374 0.406 65.392 7.777 6 0.334
Note: Sig.: Significance

Table 3. Sample profile

Items Categories n Share

Firm size Micro 110 33.33%
small 110 33.33%
medium 110 33.33%
Total 330 100%
Firm sector manufacturing 165 50%
service 165 50%
Total 330 100%
Respondents’ Less than bachelors’ 90 27.28%
Education
Bachelors’ and more 240 72.72%
Total 330 100%
Respondents’ Up to 10 years 210 63.64%
Working
More than 10 years 120 36.36%
Experience
Total 330 100%
Table 4. The results for 1st research model

Odds 95% CI
Variable Estimate S.E. Wald df Sig.
Ratio [Lower Upper]
Dig. Trans. = 1 -2.690 0.232 134.645 1 0.000 0.068 [-3.144 -2.236]

Dig. Trans. = 2 -1.646 0.200 68.068 1 0.000 0.193 [-2.037 -1.255]

Dig. Trans. = 3 0.826 0.174 22.579 1 0.000 2.283 [0.485 1.166]

Litconofcom = 1 -2.161 0.475 20.676 1 0.000 0.115 [-3.092 -1.229]

Litconofcom = 2 -2.173 0.316 47.237 1 0.000 0.114 [-2.792 -1.553]

Litconofcom = 3 -1.091 0.248 19.329 1 0.000 0.336 [-1.578 -0.605]

Note: S.E.: Standard Error, df: Degree of freedom, CI: Confidence intervals.

Table 5. The results for the 2nd research model

Odds 95% CI
Variable Estimate S.E. Wald df Sig.
Ratio [Lower Upper]
Dig. Trans. = 1 -2.800 0.255 120.511 1 0.000 0.061 [-3.300 -2.300]

Dig. Trans. = 2 -1.714 0.223 58.946 1 0.000 0.180 [-2.152 -1.277]

Dig. Trans. = 3 0.779 0.197 15.658 1 0.000 2.180 [0.393 1.165]

Litactofcom = 1 -2.547 0.342 55.329 1 0.000 0.078 [-3.218 -1.876]

Litactofcom = 2 -1.711 0.310 30.403 1 0.000 0.181 [-2.319 -1.103]

Litactofcom = 3 -0.626 0.268 5.476 1 0.019 0.535 [-1.151 -0.102]

Table 6. The results for 3rd research model

Odds 95% CI
Variable Estimate S.E. Wald df Sig.
Ratio [Lower Upper]
Dig. Trans. = 1 -4.304 0.397 117.518 1 0.000 0.014 [-5.083 -3.526]

Dig. Trans. = 2 -3.062 0.372 67.643 1 0.000 0.047 [-3.792 -2.333]

Dig. Trans. = 3 0.350 0.263 1.770 1 0.183 1.419 [-0.166 0.865]

Security = 1 -3.473 0.395 77.126 1 0.000 0.031 [-4.248 -2.698]

Security = 2 -0.356 0.389 0.839 1 0.360 0.700 [-1.119 0.406]

Security = 3 -0.429 0.390 1.207 1 0.272 0.631 [-1.194 0.336]