Digital transformation and organizational readiness: evidence from Chinese construction SMEs with a dynamic managerial capabilities lens

Purpose In the digital economy, the adoption and implementation of digital transformation (DX) is essential for small and medium-sized enterprises (SMEs) in the construction industry to secure a competitive advantage and achieve sustainability. This study examines the dynamic managerial capabilities of SME leaders and the organizational readiness required to facilitate DX. Design/methodology/approach Drawing on insights from 33 managers across six SMEs, the study identifies key dynamic capabilities, organizational readiness factors, and transformation challenges. The framework was further refined and validated through a Delphi process, resulting in a four-layer model that links internal capabilities to specific DX challenges and provides a structured roadmap for SME transformation. Findings Our findings reveal that DX in construction SMEs is driven by five dynamic capabilities: environmental sensing, strategic agility, resource mobilization, digital ecosystem building and organizational learning. In addition, organizational readiness serves as a critical enabler, shaped by leadership and cultural readiness, policy and stakeholder alignment and technological preparedness. Building on these insights, we propose a four-layer integrative framework that links these capabilities and readiness factors to specific internal and external challenges, providing a structured pathway for overcoming barriers and facilitating effective DX in construction SMEs. Originality/value This study provides actionable insights by clarifying how construction SMEs strategically organize and leverage DX-related resources and capabilities to drive change and maintain a competitive edge. It contributes to theory by introducing an integrative framework that illuminates the interrelationships among these resources, managerial competencies and readiness factors, offering a detailed roadmap for implementing and sustaining DX.