| Environment and Social Psychology
ESP-3430

Published

2025-03-18

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Vol. 10 No. 3 (2025): Published

Section

Research Articles

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Copyright (c) 2025 Tianyu Chao

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How to Cite

Chao, T. (2025). Optimization of SMEs’ compensation system in digital transformation: An empirical analysis based on organizational performance. Environment and Social Psychology, 10(3). https://doi.org/10.59429/esp.v10i3.3430

Optimization of SMEs' compensation system in digital transformation: An empirical analysis based on organizational performance

Tianyu Chao

1. Universiti Kuala Lumpur,1016, Jalan Sultan Ismail,50250 Kuala Lumpur; 2. Changzhou Vocational Institute of Light Industry,No.28, Mingxin Middle Road, Wujin District, Changzhou


DOI: https://doi.org/10.59429/esp.v10i3.3430


Keywords: Compensation system optimization; digital transformation; organizational performance; SMEs

Abstract

This study investigates the optimization of compensation systems for Small and Medium Enterprises (SMEs) undergoing digital transformation and its impact on organizational performance. Drawing on an integrated conceptual framework, the research examines the relationships between compensation system components, including base salary structure, performance incentives, digital skill allowances, and long-term incentives, digital transformation capability, and multidimensional organizational performance. These findings suggest that improving compensation systems, particularly through digital skill allowances and performance-based incentives, has a positive effect on organizational outcomes, both directly and indirectly mediated by the capacity for digital transformation. In addition, organizational culture, technological readiness, and environmental dynamism are identified as the key moderating variables. Based on these insights, the study will suggest novel compensation management strategies, including digital capability-based structures and performance-oriented incentive frameworks, to better help SMEs in their digital transformation journeys. Both the theoretical and practical implications contribute to the continuing academic debate and provide very relevant guidance for SME practitioners.

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