Digital Technology at the Core: Facilitating Adoption for Enhanced SME Performance and Sustainability

Abstract

This study proposes the individual–technology–organisation–environment–sustainability (I-TOE-S) framework to examine the adoption of digital technology (DT) in small and medium enterprises (SMEs) for enhancing financial performance and environmental sustainability. The study extends the traditional TOE framework by integrating individual and sustainability factors as critical enablers of DT adoption. A comprehensive literature review facilitated the identification of relevant factors. A systems approach was employed to understand the complex interrelationships among these factors that collectively influence SMEs’ sustainable adoption of DT. System dynamics modelling was used to examine the relationships between I-TOE-S factors, SME performance and environmental sustainability. Simulations were conducted using data from a survey of 97 food processing SMEs, analysed through Stella 9.1 software. The findings indicate that I-TOE-S factors are significant drivers of DT adoption in SMEs, contributing to not only improved financial performance but also enhanced environmental sustainability in the food processing industry. However, the results also reveal that DT usage remains largely confined to operational activities and is insufficiently integrated into core business processes. This suggests that long-term sustainability cannot be achieved if DT adoption is restricted to the operational level alone. The robustness of the model was confirmed through sensitivity analysis, ensuring the reliability and accuracy of the simulation results. The study offers managerial implications that emphasise sustainability-oriented decision-making to support long-term profitability.