International Journal of Modern Engineering and Management

Digital Transformation Maturity and Performance Outcomes in Indian MSMEs: A Technology-Organisation-Environment Framework Analysis

Author(s):

Ramesh Iyer, Shalini Verma, Narayanan Gopalakrishnan

Affiliation: Department of Strategy and Innovation, XLRI Xavier School of Management, Jamshedpur, Jharkhand, India, Department of Information Systems, Institute of Management Technology, Ghaziabad, Uttar Pradesh, India

Page No: 61-64-

Volume issue & Publishing Year: Volume 3, Issue 3, 2026/03/17

Journal: International Journal of Modern Engineering and Management | IJMEM

ISSN NO: 3048-8230

DOI:

Download PDF Cite this article

Abstract:

Digital transformation among Indian MSMEs has accelerated dramatically since COVID-19, yet aggregate data mask substantial heterogeneity in transformation depth, quality, and performance outcomes. This study examines digital transformation maturity and its performance consequences across 487 MSME-sector firms across six states (Maharashtra, Tamil Nadu, Gujarat, Telangana, Rajasthan, and Karnataka), using the Technology-Organisation-Environment (TOE) framework with a novel Digital Transformation Maturity Index (DTMI) updated to reflect 2024-25 ecosystem developments — including ONDC scaling to 10+ lakh sellers, GeM procurement crossing Rs. 4.5 lakh crore in FY2024-25, and RBI's digital lending framework normalising embedded credit for supply chain participants. SEM analysis identifies technology readiness (β=0.46), owner-manager digital literacy (β=0.41), and digital financing ecosystem access (β=0.33) as the strongest TOE antecedents. Only 21.4% of sample MSMEs have achieved Stage 3+ digital maturity, with Gujarat highest (39%) and Rajasthan lowest (14%). Stage 4-5 firms achieve 26.1% revenue CAGR (2021-2025) versus Stage 1 firms' 6.8%, with the gap widening as platform economics accelerate the structural disadvantage of digital laggards. AI-tool adoption — ChatGPT-based customer service, Zoho AI-integrated ERP, and WhatsApp Business API for commerce — emerges as a new Stage 5 differentiator not captured in prior DTMI frameworks.

Keywords:

digital transformation, MSME, DTMI, TOE framework, ONDC, GeM, AI adoption, digital lending, India 2025, owner-manager digital literacy

Reference:

• [1] GeM. (2025). Government e-Marketplace Annual Report 2024-25. Ministry of Commerce.

• [2] Ministry of MSME. (2025). Annual Report 2024-25. Government of India.

• [3] NASSCOM. (2024). AI Adoption in Indian SMEs: A 2024 Survey. National Association of Software and Service Companies.

• [4] OECD. (2024). SME and Entrepreneurship Outlook 2024. OECD Publishing.

• [5] ONDC. (2025). ONDC Network Monthly Report March 2025. Open Network for Digital Commerce.

• [6] RBI. (2022). Digital Lending Framework. Reserve Bank of India.

• [7] Teece, D. J. (2007). Explicating dynamic capabilities. Strategic Management Journal, 28(13), 1319–1350.

• [8] Tornatzky, L. G., & Fleischer, M. (1990). The Process of Technological Innovation. Lexington Books.

• [9] World Bank. (2024). Enterprise Survey India 2024. World Bank Group.

• [10] Zhu, K., Kraemer, K., & Xu, S. (2006). The process of innovation assimilation by firms in different countries. Management Science, 52(10), 1557–1576.