Industrial SME performance under saudi vision 2030
the role of institutional support, digital transformation, and innovation capability
DOI:
https://doi.org/10.23925/2179-3565.2026v17i2e76637Keywords:
Digital Transformation, Industrial SMEs, Innovation capability, Institutional Support, Saudi Arabia, SME performanceAbstract
Industrial small and medium-sized enterprises (SMEs) play a critical role in industrial diversification, innovation development, employment generation, and sustainable economic growth. Within the context of Saudi Vision 2030, industrial SMEs have gained increasing strategic importance due to ongoing economic reforms, entrepreneurship initiatives, digital transformation programs, and industrial development policies. Despite these efforts, limited empirical evidence explains how institutional environments and technological transformation jointly influence industrial SME performance through internal organizational capabilities. Drawing upon Institutional Theory, the Resource-Based View (RBV), and Dynamic Capabilities, this study develops and empirically tests an integrated framework explaining the relationships among institutional support, digital transformation, innovation capability, and industrial SME performance. A quantitative cross-sectional research design was employed using survey data collected from 350 industrial SMEs operating in Saudi Arabia. The proposed model was analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) to examine direct and indirect relationships. The findings reveal that institutional support and digital transformation exert significant positive direct effects on industrial SME performance while also generating indirect effects through innovation capability. Innovation capability emerged as the principal mediating mechanism explaining how external support systems and technological investments are transformed into organizational performance outcomes. The mediation findings further confirm the complementary roles of Institutional Theory, RBV, and Dynamic Capabilities in explaining industrial SME performance within transformation economies such as Saudi Arabia. This study contributes theoretically by integrating multiple perspectives into a unified explanatory framework and empirically extending the literature on SME performance, innovation, and digital transformation. Contextually, the study provides evidence from Saudi Arabia as an emerging economy experiencing large-scale industrial and structural transformation under Vision 2030. The findings offer important implications for policymakers, industrial stakeholders, and SME managers seeking to enhance innovation capability, digital readiness, industrial competitiveness, and sustainable growth.
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