The Impact of the Digital Economy on the Competitive Advantage of Small and Medium-Sized Enterprises in Jordan

This study aims to examine the effect of the digital economy on the competitive advantage of small and medium-sized enterprises (SMEs) in Jordan on a quantitative basis by applying the partial least squares structural equation modelling (PLS-SEM) method, which was used to collect and analyze survey data from 309 SMEs. Key areas of the digital economy studied were digital infrastructure, e-commerce adoption, digital payment systems, digital transformation and advanced digital technologies. The results show that digital infrastructure, advanced digital technologies, e-commerce adoption, and digital transformation are positively associated with competitive advantage with the highest positive coefficient being for digital infrastructure (β = 0.519, p < 0.001), followed by advanced digital technologies (β = 0.158, p = 0.004), e-commerce adoption (β = 0.142, p = 0.045), and digital transformation (β = 0.128, p = 0.007). Digital payment systems, on the other hand, failed to show a statistically significant impact (β = 0.014, p = 0.706). The structural model had an acceptable level of variance for competitive advantage (R² = 0.682) and had excellent predictive relevance (Q² = 0.667). The results support the Resource Based View (RBV) and Dynamic Capabilities Theory (DCT) in that digital capabilities are indeed valuable strategic resources to improve the competitiveness of SMEs. The study comes at a time of great need for empirical evidence when it comes to the relative contribution of different dimensions of the digital economy toward generating competitive advantage, as this topic is missing from the literature on SME digitalization in the Jordanian context. The conclusions provide implications for both policy makers and SME managers, with the policy implications being to focus on investments in digital infrastructure and the managerial to strategically use advanced digital technologies to enhance innovation, operation efficiency, and market responsiveness. This study methods bring together several aspects of the digital economy in the context of a developing economy, adding to the existing digital transformation literature and offering practical recommendations to improve the competitiveness of SMEs.