Human Capital Capability and Digital Transformation in Enhancing SME Performance: A System Dynamics Perspective
DOI:
https://doi.org/10.38035/gmbr.v3i1.857Keywords:
Human Capital Capability, Digital Transformation, SME Performance, System Dynamic, Digital Capability, Organizational LearningAbstract
Small and medium enterprises (SMEs) are expected to use digital technology while maintaining business performance. However, technology investment does not automatically produce better results. The benefits of digital transformation depend on whether employees have the knowledge and skills needed to use technology, whether the organization can learn from digital information, and whether improved performance creates resources for further development. This study develops a system dynamics model to explain the interaction between human capital capability, digital transformation, and SME performance. A systematic literature review is used to identify the main variables and causal relationships, followed by causal loop and stock-flow modelling. The proposed model contains reinforcing and balancing feedback structures. The reinforcing loop shows how human capital development can strengthen digital capability, learning, innovation, and performance, which in turn can increase resources for further capability development. The balancing loop captures the digital skill gap that may slow transformation when technology develops faster than employee capability. The model provides a basis for scenario simulation and future empirical validation using SME data.
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