MSME Businesses Performance: Examining the Impact of Digital and Technological Capabilities using Partial Least Squares Structural Equation Modeling and Necessary Condition Analysis

This research aims to research the effects of innovation, as well as digital and technological capabilities, on the performance of micro, small and medium enterprises (MSME) in Portugal post the initial wave of the COVID-19 pandemic. Leveraging longitudinal data from the 2019 World Bank business surveys and the subsequent 2020 World Bank Covid-19 follow-up business surveys, encompassing a sample of 605 MSME, we delve into the relationships between these variables. We examine the impact of innovation and digital and technological capabilities on performance from two distinct perspectives: one based on necessity and the other on sufficiency. Our analytical approach combines the utilization of partial least squares structural equation modeling (PLS-SEM) with necessary condition analysis (NCA). The findings of our study unequivocally indicate that both technological capabilities and digital capabilities exert a positive influence on MSME performance. Additionally, it is noteworthy that innovation indirectly enhances performance by way of its impact on digital capabilities.