Brains and Bytes: Linking Intellectual Capital and Digital Transformation to the Triple Bottom Line Performance of Manufacturing SMEs of Pakistan

Abstract

In an increasingly competitive and technology-driven environment, manufacturing SMEs are under pressure to integrate digital transformation strategies to remain sustainable. This study develops a conceptual model to examine the influence of intellectual capital (IC) – human, structural, and relational – on sustainable performance, with digital transformation as a mediating factor, drawing on the knowledge-based view and dynamic capabilities theory. A structured questionnaire survey was administered to manufacturing SMEs in Pakistan using purposive sampling. A total of 215 valid responses were obtained. Partial least squares structural equation modelling (PLS-SEM) was employed via SmartPLS 4.0 to assess the measurement model for reliability and validity, and to test the hypothesized relationships in the structural model. The results confirm that IC positively influences digital transformation, which in turn significantly enhances sustainable performance across economic, environmental, and social dimensions. Furthermore, digital transformation mediates the relationship between IC and sustainable performance, indicating its pivotal role in translating knowledge resources into long-term value creation. This study extends empirical evidence on the interrelationship between IC, digital transformation, and sustainability in the manufacturing SME context. The findings provide theoretical insights into leveraging IC for digital adoption and offer practical guidance for SME leaders and policymakers seeking to foster resilience, innovation, and sustainable growth.