Assessing the mediating role of human capital in the relationship between digital transformation and firm performance

Purpose – This study applies the resource-based view (RBV) and dynamic capability theory (DCT) to investigate the correlation between digital transformation (DT), human capital (HC) and firm performance (FP). Additionally, it employs mediation to analyze the role of HC in the relationship between DT and FP. Design/methodology/approach – A survey-based approach was utilized to gather quantitative data from the owners and managers of small and medium-sized enterprises (SMEs). A total of 867 questionnaires were disseminated to SME owners and/or managers. In conjunction with the bootstrapping method, 356 responses were used to evaluate the framework using the partial least squares (PLS) algorithm. Findings – Based on the findings, digital capabilities (DC) and management support (MS) substantially affect DT. At the same time, DT significantly and positively affected HC. In addition, HC had a significant impact on FP. Furthermore, this study’s findings verify that HC completely mediates the relationship between DT and FP. Originality/value – The findings show how digital transformation improves organizational performance through the intermediary effect of human capital. Furthermore, we experimentally demonstrate that national economic growth moderates the direct and indirect effects of the antecedents of digital transformation on business performance.