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This study examines the impact of digital capabilities and digital orientation on the digital transformation and digital innovation of small and medium enterprises (SMEs) during the COVID-19 pandemic. In addition, this study assesses how the role of digital transformation and digital innovation mediates the relationship between digital capabilities, digital orientation, and SME performance during the COVID-19 pandemic. Using a sample of 247 SMEs managers, data were analyzed using the structural equation modeling with a partial least square approach. The findings demonstrate the significant and positive influence of digital capability and orientation on SMEs’ digital transformation and innovation during the pandemic. Additionally, the study confirms that digital transformation and innovation positively affect SMEs’ performance during the pandemic. Furthermore, the study reveals that digital transformation and innovation mediate the relationship between digital orientation and capability on SMEs’ performance during the pandemic. However, digital innovation was not found to significantly mediate the link between digital capability and SMEs’ performance.

Researchers have emphasized the role of e-commerce for small enterprises in improving their performance. However, there is limited evidence on the use of e-commerce by small enterprises, and e-commerce adopters and non-adopters dealing with COVID-19. Therefore, the purpose of this study is to investigate the differences in the impact of COVID-19 on income between small enterprises that are adopters and non-adopters of e-commerce. This study also explored the impact of restrictions on community activities, the intention to adopt e-commerce, and the types of assistance required by small enterprises due to the pandemic. Data were collected through an online questionnaire survey among small enterprises that operate in the culinary field (1,024 small enterprises in Indonesia). The data were analyzed using descriptive analysis, cross-tabulation, and the Mann-Whitney test. This study finds that non-adoption of e-commerce caused small enterprises to experience a decline in income, which worsened due to restrictions of community activities, compared to adopters of e-commerce. Therefore, to overcome this negativity, small enterprises were pushed to adopt e-commerce. Finally, working capital assistance is the main assistance required due to the pandemic both by e-commerce adopters and non-adopters. This study has significant implications for how small enterprises and governments may benefit from e-commerce dealing with extreme disruptions such as the COVID-19 pandemic. AcknowledgmentWe are grateful to Mulawarman University for providing us with the funding necessary to gather the necessary data for the study and complete this empirical investigation. We also would like to thank two anonymous reviewers and seminar participants at Mulawarman University for their helpful feedback.