Abstract:
This study explores the impact of digital transformation on the performance of Small
and Medium Enterprises (SMEs) in the Sabaragamuwa Province of Sri Lanka. In an
era where digital technologies are reshaping business operations, many rural SMEs
continue to face challenges in digital adoption due to limited resources, infrastructure,
and support. The research aims to examine how four variables – compatibility, cost effectiveness, trust, and human-technology interactivity – impact SME performance
in a developing regional context. A quantitative research design was adopted, and
data were collected from 322 SMEs across agriculture, manufacturing, and service
sectors. Statistical tools, including descriptive analysis, correlation, and regression
analysis, were employed to assess the relationships between the main factors.
Findings confirmed that all four variables positively impact SME performance, with
human-technology interactivity emerging as the most influential predictor. The
regression model explained 63.3% of the variation in SME performance, showing the
importance of interactive, affordable, and trustworthy digital tools that align with
existing business systems. The study highlights that digital adoption is an important
driver of SME competitiveness and sustainability in rural regions, as long as digital
solutions are accessible, secure, and aligned with operational needs. Practical
recommendations are offered for policymakers, technology developers, and SME
owners to overcome transformation barriers. The study also contributes to the
academic understanding of digital transformation in developing economies and
suggests future research directions to further explore this evolving domain.
