Sustainable digital transformation in Malaysia’s service-based MSMEs: leadership and governance drivers for business resilience

Purpose This research aims to explore the factors shaping digital transformation within micro, small and medium-sized enterprises (MSMEs) in Malaysia’s service sector. By integrating the technology-organisation-environment framework with the diffusion of innovations theory, this study unpacks how innovation characteristics, internal capabilities and external influences collectively shape the strategic adoption of digital technologies for sustainable and responsible business growth. Design/methodology/approach Data were collected from 391 MSME owners and decision-makers. Regression analysis was used to examine the relationships between key determinants and the adoption of digital transformation. Findings The findings reveal that top management support emerges as the most influential driver of digital transformation readiness, followed by relative advantage, customer experience and government support, all of which exert significant effects. In contrast, technology compatibility and financial resources were not found to have a significant effect. Research limitations/implications The findings highlight the importance of leadership, customer-centric strategies, supportive government policies and technology provider collaboration in advancing digital transformation. It challenges the weight of technological and financial readiness, urging future research to examine governance-related and organisational factors that shape MSMEs’ digital transformation, particularly within emerging economies such as Malaysia. Originality/value This study contributes to the understanding of digital transformation adoption in the Malaysian MSME service sector, offering actionable insights for policymakers and business leaders aiming to foster inclusive growth. It provides a comprehensive framework for addressing barriers and enhancing adoption strategies while emphasising leadership accountability and institutional support as foundations for sustainable, transparent and resilient business practices.