Abstract
Digital transformation has become a defining feature of contemporary industrial competitiveness, shaping how organisations adapt to technological change, reconfigure capabilities, and participate in increasingly complex global value chains. Yet in South Africa’s automotive component manufacturing sector, many small and medium-sized enterprises (SMEs) remain digitally underdeveloped, resulting in persistent underperformance in innovation. These SMEs, which play a critical role in industrial development, supplier upgrading, and employment creation, operate within asymmetric supply-chain relationships dominated by multinational original equipment manufacturers (OEMs) that impose escalating digital and innovation requirements while offering limited technical, financial, or capability-building support. Against this backdrop, the study draws upon the technology–organisation–environment (TOE) framework and capability-based view (CBV) theory to explain how digital transformation in manufacturing SMEs is shaped by technological, organisational, and environmental conditions, and how the development and deployment of firm-specific capabilities enable the translation of digital transformation into innovation performance. Employing a cross-sectional quantitative research design, data will be collected via structured questionnaires from approximately 204 automotive component manufacturing SMEs across selected provinces of South Africa and analysed using Partial Least Squares–Structural Equation Modelling (PLS-SEM) to assess direct and mediating effects between constructs, while controlling for firm location, firm size, and firm age. The study extends the TOE framework by explicitly incorporating innovation outcomes, advances CBV theory by empirically validating the mediating role of product innovation capability and provides actionable insights for managers and policymakers seeking to enhance SME competitiveness in manufacturing and global value chains.