Digital transformation, organizational agility, and firm performance in emerging markets: Evidence from Vietnam’s machinery sector

Type of the article: Research Article AbstractFirms in emerging markets are increasingly compelled to implement digital transformation strategies in response to rapid technological disruption and intensifying global competition. However, the impact of such transformation on organizational performance remains underexplored, particularly in resource-constrained contexts. This study aims to assess how digital orientation and digital capacity influence the implementation of digital transformation, and how digital transformation, in turn, affects organizational agility as well as financial and non-financial performance. Data were collected through a survey of senior managers – those directly responsible for leading digital transformation strategies – at 518 mechanical engineering enterprises in Vietnam, conducted between August and November 2024. The research model was tested using partial least squares structural equation modeling (PLS-SEM). The results reveal that digital orientation (β = 0.585, p < 0.001) and digital capacity (β = 0.240, p < 0.001) significantly promote the adoption of digital transformation. Subsequently, digital transformation exerts a strong positive influence on organizational agility (β = 0.815, p < 0.001). In turn, organizational agility significantly enhances financial performance (β = 0.795, R² = 0.632) and non-financial performance (β = 0.536, R² = 0.287). These findings provide empirical evidence that digital transformation efforts can create practical value when they are grounded in well-aligned internal capabilities. The study contributes to clarifying how enterprises in emerging economies can align digital investments with organizational strengths to improve performance amid volatile environments.