The Effect of Dynamic Capabilities on MSMEs Digitalization: Exploring the Moderating Role of Firm Age

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: This paper examines how digitalization of Micro, Small, and Medium Enterprises (MSMEs) is influenced by their ability to adapt in a turbulent environment. Our goal is to understand the role of dynamic capabilities, specifically sensing and seizing opportunities, in the digital maturity of firms. We employ a structural equation model to analyze the effect of these capabilities on MSMEs’ digitalization, taking advantage of a novel data set from the self-assessment tool Chequeo Digital in Ecuador. Our focus on dynamic capabilities in the MSMEs context, represents a significant contribution, enhancing our understanding of the determinants of digitalization. The results show a positive and substantial effect of both capabilities on the digital advance of MSMEs. Moreover, we found a negative and significant moderating effect of firm age, on the relationship between sensing capability and digitalization, suggesting that older firms may face in adopting digital technologies when compared to their younger counterparts.