Digital Intensity and Financial Performance of Indian Listed MSMEs: Evidence from an Observable Digital Maturity Index
DOI:
https://doi.org/10.66635/ssea1s24Keywords:
Digital intensity, MSME performance, digital maturity, financial performance, Indian listed SMEs, digital transformation, dynamic capabilitiesAbstract
Digital transformation is increasingly becoming a strategic imperative for small-firm competitiveness, but there is little evidence on whether observable digital maturity translates into improved accounting-based performance among listed micro, small and medium enterprises (MSMEs) in emerging-market contexts. This study develops and applies a Digital Intensity Index (DII) to examine whether Indian listed MSMEs with high digital presence and digital engagement are reporting better financial performance than firms with weak or moderate digital maturity. The DII is made up of five publicly observable indicators: the existence of an official website, social media activity, LinkedIn/professional visibility, the ability to engage customers online and digital content or campaign activity. A final cleaned sample of 38 listed MSMEs is classified in the groups of low/non-digital (ND-MSME), moderately digital (MD-MSME) and highly digital (HD-MSME). The financial performance is assessed by sales growth, return on assets, return on equity and net profit margin. The empirical strategy comprises descriptive statistics, one-way ANOVA, Tukey post-hoc comparisons, Pearson correlation, linear regression, sector-wise analysis and additional PLS-SEM validation for digital adoption mechanisms. The results show that HD-MSMEs out-perform ND-MSMEs and MD-MSMEs on all the four financial indicators. The significant inter-group differences are proved by the ANOVA and the regression shows that DII explains 37.4% of sales growth, 46.8% of return on assets, 41.1% of return on equity and 35.2% of net profit margin . The results suggest that digital maturity is a measurable strategic capability linked to growth, efficiency, profitability and shareholder return in listed MSMEs. The study presents a replicable evidence-based digital classification framework and offers policy and managerial implications for the digital upgrading of MSMEs in emerging economies.
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