ICT, Supply Chain Digital Integration Capability, and Firm Financial Performance: The Antagonistic Effects of Perceived Government Support and Cognitive Constraints on Digital Transformation

While awareness among managers regarding the benefits of digital transformation in supply chain management has grown, many Chinese SMEs have not fully embraced this shift due to ineffective ICT investments, a lack of effective government support, and the presence of related cognitive challenges. Leveraging a sample of 302 SMEs in China, the study employs SEM techniques to validate the direct effect of ICTs on the digital integration capability, and the relationship between the digital integration capability and firm financial performance. Furthermore, the LMS technique is applied to investigate the moderating role of government support and cognitive constraints within these relationships. Result shows that: (1) ICTs positively affect firm’s supply chain digital integration capability; (2) firm’s supply chain digital integration capability positively affects firm financial performance; (3) perceived government support exhibits an antagonistic effect, hindering the promotion of supply chain digital integration capabilities through ICT infrastructures; (4) Certain cognitive constraints related to digital transformation act as negative moderators within the digital transformation process. Through the exploration of two previously overlooked factors, namely perceived government support and cognitive constraints related to digital transformation, our research contributes to a deepened understanding of dynamic capability theory, social cognitive theory, and organizational inertia theory. Our findings suggest that government policymakers must reassess the effectiveness and objectives of policies in the digital transformation journey. Furthermore, firms are urged to acknowledge and address the potential adverse effects of cognitive constraints within their organizations and among their supply chain partners. Emphasizing the importance of digital integration capability is also crucial. Plain Language Summary In this research, we investigated the digital transformation challenges faced by SMEs in China, with a focus on 302 manufacturing SMEs in the Pearl River Delta and Yangtze River Economic Belt. The study aimed to examine the necessity for SMEs to extend their focus beyond mere investment in ICTs toward enhancing digital integration capabilities to achieve improved financial performance. Additionally, it explored how SMEs’ perceptions of government support and cognitive constraints influence the relationship between ICTs and digital integration capability, as well