ISSN: 2222-6990
Open access
In an era defined by rapid digital advancement, Small and Medium Enterprises (SMEs) must embrace digital transformation to remain competitive in the marketplace. However, many SMEs face significant challenges when integrating digital technology into their business operations. This study aims to explore these challenges in-depth, with a particular focus on identifying the factors that hinder the digital transformation of Malaysian SMEs. By synthesizing existing knowledge through secondary data sources, such as journals and articles from online databases, this research provides a comprehensive understanding of the barriers faced by SMEs in adopting digital technology such as Internet of Things (IoTs), cloud computing, big data, blockchain, and artificial intelligence (AI). The findings contribute valuable insights to SMEs, policymakers, and researchers, especially in developing countries, highlighting the importance of addressing these challenges to promote growth and sustainability in the digital era.
Ab Rani, N. Z. A., Ismail, M. K., Kumaran, V. V., bin Muhamad, M. Z., & Shaupi, N. S. A. (2022). Analyzing the challenges in adopting digitalization among SMEs: A case study in Malaysia. RES MILITARIS, 12(4), 499-509.
Abdulaziz, Q. A., Mad Kaidi, H., Masrom, M., Hamzah, H. S., Sarip, S., Dziyauddin, R. A., & Muhammad-Sukki, F. (2023). Developing an IoT framework for industry 4.0 in Malaysian SMEs: an analysis of current status, practices, and challenges. Applied Sciences, 13(6), 3658.
Bansal, A. (2019). Digital trends that are going to change how SMEs work. The Economic Times.
Bloching, B., Leutiger, P., Oltmanns, T., Rossbach, C., Schlick, T., Remane, G., ... & Shafranyuk, O. (2015). Die digitale Transformation der Industrie. Roland Berger Strategy Consultants GmbH & Bundesverband der Deutschen Industrie, München.
Brennen, J. S., & Kreiss, D. (2016). Digitalization. The International Encyclopaedia of Communication Theory and Philosophy, 1-11.
Cahyono, B., Nurcholis, L., & Nugroho, M. (2022). Information Technology Implementation in SMEs: A Comparison of Indonesia and Malaysia. Jurnal Manajemen Teori dan Terapan, 15(1).
Department of Statistics Malaysia. (2023, July 21). Retrieved from dosm.gov.my: https://www.dosm.gov.my/portal-main/release-content/micro-small--medium-enterprises-msmes-performance-2022
Department of Statistics Malaysia (DOSM). (2023, July 27). Retrieved from dosm.gov.my: https://www.dosm.gov.my/uploads/release-content/file_20230727111608.pdf
Hamidi, S. R., Aziz, A. A., Shuhidan, S. M., Aziz, A. A., & Mokhsin, M. (2018). SMEs maturity model assessment of IR4. 0 digital transformation. In Proceedings of the 7th International Conference on Kansei Engineering and Emotion Research 2018: KEER 2018, 19-22 March 2018, Kuching, Sarawak, Malaysia (pp. 721-732). Springer Singapore.
Khai, K. G., Onn, Y. W., Zulkifli, R. B., Kandasamy, S., & Ahmad, A. B. (2020). The Necessity to Digitalize SME Business Model During the Covid-19 Pandemic Period to Remain Sustainable in Malaysia. Korea, 99, 47-7.
Kumar, M. A., & Ayedee, D. N. (2021). Technology Adoption: A Solution for SMEs to Overcome Problems During COVID-19. Forthcoming, Academy of Marketing Studies Journal, 25(1).
Larjovuori, R. L., Bordi, L., & Heikkilä-Tammi, K. (2018, October). Leadership in the Digital Business Transformation. In Proceedings of the 22nd International Academic Mindtrek Conference (pp. 212-221).
Leu, J. F., & Masri, R. (2019). Dilemma of SMEs in Business Digitization: A Conceptual Analysis of Retail SMEs in Malaysia. International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies, 10(7), 925-936.
Mohamad, A., Mustapa, A. N., & Razak, H. A. (2021). An Overview of Malaysian Small and Medium Enterprises: Contributions, Issues, and Challenges. Modeling Economic Growth in Contemporary Malaysia, 31-42.
Müller, J. M., Buliga, O., & Voigt, K. I. (2018). Fortune favors the prepared: How SMEs approach business model innovations in Industry 4.0. Technological forecasting and social change, 132, 2-17.
Rachinger, M., Rauter, R., Müller, C., Vorraber, W., & Schirgi, E. (2018). Digitalization and its influence on business model innovation. Journal of Manufacturing Technology Management, 30(8), 1143-1160.
SME Corporation Malaysia. (n.d.). Retrieved from smecorp.gov.my: https://www.smecorp.gov.my/index.php/en/policies/2020-02-11-08-01-24/sme-definition
Yuen, T. M., & Baskaran, S. (2023). Going digital for SMES: Adapting business model and seizing opportunities to achieve sustainable business performance. Int J Acad Res Bus Soc Sci, 13(11), 976-87.
Viswanathan, R., & Telukdarie, A. (2021). A systems dynamics approach to SME digitalization. Procedia Computer Science, 180, 816-824.
Zamani, S. Z. (2022). Small and Medium Enterprises (SMEs) Facing an Evolving Technological Era: A Systematic Literature Review on the Adoption of Technologies in SMEs. European Journal of Innovation Management, 25(6), 735-757.
Halid, H., Johari, N. A., Yahya, S. B. Y. @, & Jamaludin, N. (2025). Digital Transformation Roadblocks: Challenges Face by Small and Medium Enterprises (SMEs) in Integrating Digital Technology. International Journal of Academic Research in Business and Social Sciences, 15(12), 2747–2755.
Copyright: © 2025 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode