The Effect of E-Commerce and Digital Marketing Adoption on Financial Performance and Sustainability in MSMEs During the COVID-19 Pandemic: An Empirical Analysis

Abstract

The pandemic accelerated digital transformation, leaving MSMEs no option but to adapt to using e-commerce and online marketing to conduct operations. This article explores how the economic stability and viability of Pakistani-based micro, small, and medium enterprises have been compromised by the move to use e-commerce (ECA) and digital marketing (DMA) during the pandemic. The study is grounded in Resource-Based View (RBV) theory and hypothesizes and tests an intermediate-level of abstraction conceptual model between ECA and DMA and financial performance and sustainability where financial performance mediates the relationship between financial performance and sustainability as per the conceptual model. The questionnaire was a directed one as it was used in the gathering of data on 212 managers of MSMEs in the wholesale/retail or pharmacy, restaurants and electronic industry. Partial Least Squares Structural Equation Modeling (PLS-SEM) has been applied to analyse the data. The results mean that ECA and DMA show the significant positive influence on financial performance. The real impact of ECA is a positive effect of sustainability but this is not the case with DMA. It is however, observed that neither ECA nor DMA and sustainability are related without the involvement of financial performance. This reveals that digital marketing does not stand alone in its contribution to sustainability given its ability to improve the financial wellness levels; e-commerce also plays a part, albeit through direct and indirect contributions. The work provides empirical discussions as to how the digital technology adoption contributes to resilience and long-term survival in the MSMEs in two ways. It provides pragmatic studying to the managers and policymakers concerned with the digitalization of emerging economies and adoption of business sustainability.