AI-Enabled Digital Transformation and Operational Performance in Nepalese SMEs: The Role of Employee Digital Readiness and IT Support Capability

Abstract

The expansion of artificial intelligence (AI) and digital technologies is reshaping the competitive environment of small and medium-sized enterprises (SMEs), while their operational value is closely linked to employees’ digital preparedness and the quality of technical support. This study examines the relationship between AI-enabled digital transformation (AIDT) and operational performance (OP) in Nepalese SMEs, with employee digital readiness (EDR) and IT support capability (ITSC) as moderators. Grounded in the resource-based view and dynamic capabilities perspective, the study employs a quantitative, cross-sectional research design and partial least squares structural equation modeling (PLS-SEM). The findings indicate a positive association between AIDT and operational performance. Both employee digital readiness and IT support capability strengthen this association, highlighting the complementary role of human competence and technical support in AI-enabled operations. The study contributes to the SME digital transformation literature by integrating these organizational capabilities in the Nepalese business context and offers practical implications for digital-skills development, technical support, and operational management