EXPLORING MEDIATION AND MODERATED MEDIATION IN ASSESSING THE IMPACT OF DIGITALISATION ON PROFITABILITY OF MSMES

Businesses whether big or small have embraced digitalisation and its ever changing scenarios. The transformation from brick and mortar stores to the virtual stores have always raised the question of what has digitalisation brought to the table for the businesses. The contribution of MSMEs in the economy of developing nations such as India makes this question more relevant for micro, small and medium enterprises. The study therefore, intends to study how efficiency and effectiveness, and cost mediate the relationship between digitalisation and profitability of MSMEs, with scale of the business acting as a moderator. A comparison is also drawn of the impact of profitability for different scales of business enterprises. The study is conducted in Delhi and Gurgaon region with a total of 253 respondents who were either owners, managers or professionals responsible for bringing about digitalisation in their businesses. The results revealed that digitalisation has positive but miniscule impact on the profitability with efficiency and effectiveness and cost as mediators. The moderated mediation analysis showed that medium enterprises were able to capitalise more via digitalisation than micro and small scale businesses. The burden of heavy discounts, tax implications, incentives offered to customers, return policy, delivery policies, commission charged by the online selling platforms, and website charges all bring the profit margin to being insufficient. The study leads to discover strategies and the different pathway that both the Government and private sector need to take to bring longevity to the local businesses in presence of e-commerce giants and serve the customers at its best.