Digital Transformation in MSMEs: A Review of the Literature

Abstract

Digital transformation has become a critical requirement for the sustainability and competitiveness of Micro, Small, and Medium Enterprises (MSMEs), particularly in the aftermath of the COVID-19 pandemic, which significantly accelerated technological adoption across various sectors. This article presents a systematic review of recent literature on digital transformation in MSMEs, aiming to explore research trends, types of technology adoption, challenges encountered, ecosystem support, and emerging strategic opportunities. The study employs a systematic literature review approach combined with content analysis of primary studies; quantitative, qualitative, and mixed-method, published within the last five years. The findings indicate a growing academic interest in MSME digitalization, particularly in both developing and developed countries. Many MSMEs have adopted digital tools such as e-commerce platforms, social media, digital payment systems, and cloud-based management technologies. Nevertheless, several significant challenges persist, including limited digital literacy, inadequate technological infrastructure, high initial costs, and a lack of sustained mentoring. Furthermore, ecosystem support, comprising government policies, incubation services, and financial sector involvement, remains fragmented and suboptimal. The review also identifies a notable gap in the literature, where research tends to emphasize technical aspects, while managerial and socio-cultural dimensions, such as leadership adaptability, organizational culture, and behavioral change, receive less scholarly attention. In response to these findings, this study recommends the need for more multidisciplinary research efforts and inclusive, long-term public policies that support the sustainable digital transformation of MSMEs. Ultimately, this article seeks to serve as a conceptual foundation for MSME practitioners, researchers, and policymakers in designing effective and holistic strategies for digital transformation