Conceptual Paper: The Antecedents Influencing Employee Digital Transformation Readiness in Malaysian Small and Medium Enterprises (SMEs)

Conceptual Paper: The Antecedents Influencing Employee Digital Transformation Readiness in Malaysian Small and Medium Enterprises (SMEs)

Nani Shuhada Sehat^*1, Siti Rohana Daud¹, Khaizie Sazimah Ahmad², Azira Rahim¹, Najihah Abdul Rahim¹, Intan Liana Suhaime¹

¹Senior Lecturer, Department of Management & Marketing, Faculty of Business Management, Universiti Teknologi MARA, Melaka Campus

²Senior Lecturer, Department of Economics, Faculty of Business Management, Universiti Teknologi MARA, Melaka Campus

*Corresponding Author

DOI: https://dx.doi.org/10.47772/IJRISS.2025.909000342

Received: 09 September 2025; Accepted: 17 September 2025; Published: 10 October 2025

ABSTRACT

Digital transformation has emerged as a critical driver of organizational competitiveness and sustainability in the global economy. In Malaysia, small and medium enterprises (SMEs) represent the backbone of the economy, accounting for most business establishments and employment. Despite their significant contributions, SMEs continue to lag larger organizations in digital transformation, raising concerns about their ability to remain competitive in an increasingly digitalized environment. Recognizing that employees are central to the success of transformation initiatives, this study investigates the antecedents influencing employee digital transformation readiness within Malaysian SMEs. Grounded in the Theory of Planned Behavior (TPB), the study examines how attitudes toward behavior, subjective norms, and perceived behavioral control shape employees’ readiness for digital transformation. A quantitative research design is employed, utilizing an online questionnaire distributed across SMEs from different economic sectors in Malaysia. Stratified purposive sampling is adopted to ensure sectoral representation, while data analysis is conducted using Partial Least Squares Structural Equation Modeling (PLS-SEM). To reduce potential bias, anonymity, validated measurement instruments, and pilot testing are employed. Theoretically, the study extends the application of TPB to the context of digital transformation in SMEs, while also acknowledging the importance of other potential influences such as digital literacy, leadership support, and organizational culture. Practically, the findings are expected to provide valuable insights for SME leaders and policymakers in designing targeted strategies, training programs, and policy initiatives that enhance employee readiness for digital transformation. Ultimately, this research emphasizes that digital transformation is not solely a technological challenge but also a human-centered process, where employee readiness plays a decisive role in enabling SMEs to thrive in Malaysia’s digital economy.

Keywords: SME, Digital Transformation, Theory of Planned Behavior, Employee Readiness, Malaysia

INTRODUCTION

In the era of rapid digital advancement, small and medium enterprises (SMEs) in Malaysia are increasingly compelled to embrace digital transformation to remain competitive and sustainable. Despite their crucial role in contributing over 39.1% to the national GDP and employing nearly half of the workforce, Malaysian SMEs have demonstrated a slow adoption rate of digital technologies, with only 21,591 out of 960,624 SMEs digitalizing between 2023 and 2024. This lag in readiness is attributed to several factors, including high initial costs, limited digital literacy, and employee resistance to change. Recognizing employees as pivotal to the success of digital initiatives, this study adopts the Theory of Planned Behavior (TPB) to explore how attitudes, subjective norms, and perceived behavioral control influence employee digital transformation readiness. The rapid advancement of digital transformation has reconfigured global industries, requiring organizations of all scales to embrace advanced technologies to maintain competitiveness. Companies across all sectors are restructuring their operations to secure strategic advantages, consistently striving for digitalization, a crucial instrument for enhancing innovative practices and augmenting revenue (Martínez-Caro et al., 2020; Singh et al., 2021). Digital transformation is being widely adopted by large organizations, especially in the manufacturing industry (Bilal et al., 2024; Cónego et al., 2024; Xue et al., 2022; Shang et al., 2024).

Small and medium-sized enterprises (SMEs) are essential to the country’s economic development. They must adjust to swiftly changing technologies and market requirements to maintain competitiveness. The rapid evolution of digital technologies has created both opportunities and challenges for industries, including small and medium enterprises (SMEs), to adapt to digital transformation (Yuen,2023). Digital transformation is a process designed to enhance an entity by encouraging substantial changes by integrating information, communication, computing, and connective technologies (Vial, 2019). Digital transformation is crucial for SMEs, enabling these businesses to identify and create new products and services, implement more efficient business practices, and minimise the gap with larger enterprises (Thuy et al., 2023).

In Malaysia, SMEs are vital to the economy, contributing over 39.1% (RM613.1 billion) of the Gross Domestic Product (GDP), employing nearly 48.5% of the workforce, and affirming their role as the backbone of Malaysia’s economy (SME Corp Malaysia, 2024). From 2023 to 2024, only 21,591 out of 960,624 total SMEs in Malaysia have adopted digitalization, as highlighted by the World Bank (Azuar & Nehru, 2024). The rapid advancement of digital transformation has reconfigured global industries, requiring organizations of all scales to embrace advanced technologies to maintain competitiveness. Companies across all sectors are restructuring their operations to secure strategic advantages, consistently striving for digitalization, a crucial instrument for enhancing innovative practices and augmenting revenue (Martínez-Caro et al., 2020; Singh et al., 2021). Digital transformation is being widely adopted by large organizations, especially in the manufacturing industry (Bilal et al., 2024; Cónego et al., 2024; Xue et al., 2022; Shang et al., 2024).

The challenge of digital transformation is even more apparent in small and medium enterprises (SMEs) than in larger firms. In Malaysia, 98.5% of the 960,624 business entities are small and medium companies (SMEs), constituting the backbone of the nation’s economy. Looking across vital economic sectors, SMEs are highly concentrated in the services sector, which accounted for 89.2% (809,126 firms) of total SME establishments. The services sector has consistently represented over 80% of all MSMEs over the analysed period (SME Corp Malaysia, 2024). In the 2023 MSME profile, the services sector represented 83.9%, with 924,170 businesses. The construction sector remained the second most significant contributor at 9.3% (102,657 enterprises). Approximately 5.4% of MSMEs (59,316 enterprises) operated within the manufacturing sector, followed by 1.2% (13,099 firms) in agriculture and the remaining 0.2% (2,483 firms) in mining and quarrying (MSME Statistics, 2020). However, despite their pivotal importance, the World Bank states that digital transformation readiness among SMEs is markedly less than that of the bigger firms. From 2023 to 2024, only 21,591 SMEs adopted digitalization through Malaysia Digital Economy Corp’s (MDEC) 100 Go Digital initiative (Azuar & Nehru, 2024). The lag in digital transformation readiness in Malaysia, highlighted by the World Bank, needs urgent attention and concerted efforts from all stakeholders. SMEs in the modern world are more sophisticated than larger enterprises and more vulnerable to external economic shocks (Auwal et al., 2018). However, Malaysian SMEs face challenges implementing digital solutions due to high initial investment costs, limited digital literacy, and employee resistance to change (Azuar & Nehru, 2024).

Simkhada (2024) and Van Der Schaft et al. (2022) highlight that employees are invaluable assets whose roles, abilities, and capacities are pivotal in navigating digital transformation for established organizations. For enterprises to embark on digital transformation, they heavily depend on resources such as employees to help the organization achieve its digital transformation goals. Digital transformation is a complex process that requires proper alignment with existing human resources for new digital initiatives, and well-prepared employees ensure a smoother transition and minimize disruptions. The more ready employees are for a digital transformation, the more likely a project will succeed, and the more the enterprise and employees will benefit. Employee readiness is a critical success factor for digital transformation, as employees play a central role in implementing new technologies and processes (Thuy, 2023; Höyng & Lau,2023; Nguyen et al., 2022; Venkatesh et al., 2012).

This research explores the antecedents influencing employee digital transformation readiness in Malaysian SMES, grounded in the Theory of Planned Behaviour (TPB) (Ajzen, 1991). TPB posits that individuals’ attitudes, subjective norms, and perceived behavioural control give an excellent conceptual framework for studying employee patterns of decision-making connected to behaviour, intention, and readiness (Srivastava et al., 2024). It is necessary to examine the role of moderating variables in the context of readiness for change and its antecedents and consequences (Alqudah et al., 2021).

Problem Statement

The world is increasingly digitalized, necessitating organizational transformation and changes (Alharbi, 2019). Digital transformation is being widely adopted by large organizations, especially in the manufacturing industry (Bilal et al., 2024; Cónego et al., 2024; Xue et al., 2022; Shang et al., 2024). A digital transformation is more challenging for small and medium enterprises (SMEs) than for larger corporations (Wahab et al., 2024; Singh, 2023; Ates & Acur, 2022; Ammeran et al., 2022). In Malaysia, SMEs comprise 98.5% of the total 960,624 business entities and the RM613.1 billion share of the GDP. They also play an important role in the national economy, especially in the services sector, which accounts for 89.2% of SME establishments (SME Corp, 2024). However, compared to larger corporations, SMEs’ readiness for digital transformation is still much lower, with only 21,591 SMEs embracing digitalization via Malaysia Digital Economy Corp’s (MDEC) 100 Go Digital project from 2023 to 2024 (Azuar & Nehru, 2024).

Empirical research on technology acceptance and digital transformation readiness has increased significantly over the last decade. Within the digital labour framework, employees’ intentional digital readiness is considered an essential capability of acceptance and efficient digitalization usage (Höyng & Lau, 2023). For a successful digital transformation, it is not only the technology and processes that need to change but also the workforce’s mindset, skills, and capabilities. (Thuy, 2023). However, understanding how to build intentional digital readiness among employees within digital transformation is still poorly understood (Höyng & Lau, 2023). Researchers have pointed out that several antecedents and consequences of readiness for change have not been explored (Alqudah et al., 2021). Furthermore, there is little research on the degree to which employees are ready for digital transformation, which leaves a significant gap in the literature (Thuy et al., 2023). Wu et al. (2025) suggested that future researchers can pay more attention to the progress of organizational digital intelligence technology from the employee level and investigate the factors influencing employees’ intention to support digital intelligence technology. Therefore, the studies of workers’ digital readiness, filling these knowledge gaps, and developing skills to face the changing work landscape are becoming more important (Leesakul et al., 2022; Nasution et al., 2020; De Carolis et al., 2017).

Research Objective

1. To examine the relationship between attitudes, subjective norms, and perceived behavioural control with Malaysian SME employees’ digital transformation readiness.
2. To identify the most influential antecedent to Malaysian SME employees’ digital transformation readiness.

Significance Of Research

This study holds theoretical and practical significance. Theoretically, it contributes to the growing body of knowledge on digital transformation readiness by applying the Theory of Planned Behavior (TPB) to SME employees. This area has received limited attention compared to larger organizations. By examining attitudes, subjective norms, and perceived behavioral control, this study advances understanding of how psychological and social factors influence employee readiness. Practically, the findings will provide SME managers with insights into employee-level drivers of digital adoption, enabling the development of more effective training, communication, and support systems. Policymakers can also utilize the results to design targeted initiatives that address human factors in digitalization, thereby accelerating Malaysia’s digital economy goals.

Limitation Of Research

This study has several limitations. First, it focuses solely on SMEs in Malaysia, which may restrict the generalizability of findings to other contexts with different economic or cultural environments. Second, the reliance on self-reported data may introduce social desirability or perceptual bias, although anonymity, pilot testing, and the use of validated instruments are employed to mitigate these risks. Third, while the Theory of Planned Behavior provides a strong foundation, other relevant factors, such as digital literacy, leadership support, and organizational culture, are not included in the model but warrant attention in future research. Fourth, the study’s cross-sectional design captures employee readiness at a single point in time, limiting the ability to infer causality or track readiness over time.

LITERATURE REVIEW

The increasing significance of digital transformation has greatly influenced organizational operations, necessitating that small and medium enterprises (SMEs) swiftly adapt to maintain competitiveness. In Malaysia, SMEs face significant obstacles to digital adoption, including constrained resources, inadequate digital knowledge, and employee resistance to transformation. Employee readiness has become a crucial determinant of success in digital transformation, as it encompasses both their willingness and ability to adopt digital transformation. The Theory of Planned Behavior (TPB) provides a significant framework for understanding employee intentions, emphasizing the importance of attitude, subjective norms, and perceived behavioral control.

Digital Transformation

Digital transformation has emerged as the standard and is seen as a crucial element for transforming business operations. It has transformed the way companies operate (Singh, 2023). In the current era of the digital economy, digital transformation has emerged as a critical tool for achieving a competitive edge, not only within industries but also on a national and global scale (Matarazzo et al., 2020). Morakanyane et al. (2017) elaborate that digital transformation is an evolutionary process that leverages digital capabilities and technologies to create value for business models, operational processes, and customer experiences. Firms in various industries are transforming their businesses to gain strategic advantages by implementing various technologies, for instance, cloud computing, augmented reality, customer profiling, data analytics, human-machine advanced interfaces, or Internet of Things (IoT) platforms (Martínez-Caro et al., 2020; Leischnig et al., 2016). Digital transformation describes the transformations that digital technology may create in an organization’s business model, including new products, organizational frameworks, or process automation (Yuen, 2023). The term differs between digitization and digitalization. Digitization refers to the process of converting non-digital or analogue information, such as paper documents, into a digital format that computers can store, process, and transmit for various purposes (Kempers, 2023; Verhoef & Bijmolt, 2019). Digitalization involves the integration of digital technologies to modify business models, improve processes, and generate new revenue and value-creating opportunities. The process entails utilizing digital tools to transform data into actionable knowledge and intelligence, thus enhancing decision-making and operational efficiency. Digitalization incorporates digital technologies throughout all societal and human activities, transforming interactions and operations across multiple domains (Kempers, 2023; Gong & Ribiere, 2020; Vrana & Singh, 2021). Digitization is the core of the third industrial revolution. Enhanced digitalization and digital transformation are key to the fourth industrial revolution (Vrana & Singh, 2024) Digitization is the transition from analog to digital, and digitalization is the process of using digitized information to simplify specific operations (Vrana J, 2020). Digital transformation uses digital infrastructure and applications to exploit new business models and value-added chains (automated communication between different apps of different companies) and, therefore, requires a change of thought process (Vrana & Singh, 2024).

Employee Digital Transformation Readiness

Employee readiness for digital transformation can be defined as the degree to which individuals are willing and able to engage with, accept, and adopt transformative technologies and organizational changes. It reflects their cognitive and emotional tendency to support purposeful changes to the status quo, moving from perception to action to facilitate digital transformation (Nguyen et al., 2022; Wang et al., 2020; Thuy et al., 2023). This readiness encompasses accepting new products, processes, or innovations and the initial support required to transition effectively, aligning with adopting and integrating transformative technologies in their roles (Cavalcanti et al., 2022).

Initiatives to digitally transform a firm require major change efforts, as employees need to know how to use and deploy (complex) digital technologies to reconfigure the way the business logic of a firm works. So, digital transformation will have a lasting impact on how employees do their jobs each day. According to research, employees resist fear and discomfort in adapting to new practices (Oreg, 2006; Oreg & Sverdlik, 2010; Rafferty & Jimmieson, 2016). Readiness refers to the first level of support individuals provide towards digital transformation, spanning from perception to action (Thuy et al., 2023). Employee readiness is necessary to build a sustainable and meaningful digital transformation (Soekamto et al., 2022; Kurniady et.al, 2022). Furthermore, the performance of employees is also the only way for enterprises to realize their digital transformation goals. As such, job performance as a target variable will be integrated into the model to make recommendations for organizations more practical and relevant (Thuy et al., 2023). Digital transformation readiness (Hoyng & Lau, 2023), in other words, is the willingness of the employees to invest their energy and effort into the process and consequently affect their behaviors. Hence, fostering this digital readiness, in which individuals are willing to and capable of using such technologies, is key to successful digital transformation (Nguyen et al. (2022).

While TPB provides a strong theoretical foundation to explain readiness, prior research also highlights other contextual factors that may shape employees’ ability and willingness to embrace digital transformation. For example, digital literacy has been shown to significantly influence employees’ confidence in adopting new technologies (Nguyen et al., 2022). Similarly, leadership support and organizational resources play a vital role in reducing resistance and enhancing readiness (Höyng & Lau, 2023). Although these variables are not directly tested in this study, acknowledging them is important for a holistic understanding of employee digital transformation readiness and offers directions for future research.

Theoretical Framework

Theory of Planned Behavior (TPB)

The Theory of Planned Behavior (TPB), proposed by Ajzen (1991), is a prominent social cognitive theory designed to explain and predict human behavior in specific contexts. It is an extension of the Theory of Reasoned Action (TRA) by Fishbein and Ajzen (1975), which originally focused on volitional behaviors. TRA claims that an individual’s behavior is primarily determined by their behavioral intention, which is influenced by their attitude towards the behavior and the current subjective norm. Attitude indicates an individual’s favorable or unfavorable assessment of executing an activity, while subjective norm involves the perceived social pressure to engage or not engage in that behavior. TRA assumes that people make rational decisions based on available information and that they have full volitional control over their actions (Fishbein & Ajzen, 1975).

Figure 1: Theory of Reasoned Action (TRA) by Fishbein and Ajzen (1975)

TPB addresses the limitations of TRA by introducing a third component, perceived behavioral control, which accounts for situations where individuals may not have complete volitional control over their actions. TPB assumes that human beings usually behave sensibly, that they take account of available information and implicitly or explicitly consider the implications of their actions (Ajzen, 2005). TPB addresses the limitations of TRA by adding a third component, perceived behavioral control, which accounts for situations where individuals may not have complete volitional control over their actions. These three components form the basis for predicting behavioral intention, which is assumed to be the most immediate antecedent of behavior. When a person has a positive attitude toward a behavior, perceives social support for it, and believes they can carry it out effectively, they are more likely to intend to perform the behavior and, consequently, more likely to do so. The relationship between the Theory of Planned Behavior (TPB) and an individual’s readiness to change is established when a person holds a favorable evaluation of the change effort (attitude), receives support from close peers (subjective norm), and possesses confidence in the effective implementation of such efforts (perceived behavioral control). This dynamic ultimately enhances motivation (intention) to actively participate in the change process (readiness for change) (Jimmieson et al., 2009).

Figure 2: Theory of Planned Behavior (TPB) by Ajzen (1991)

The relationship between the Theory of Planned Behavior (TPB) and an individual’s readiness to change is established when a person holds a favorable evaluation of the change effort (attitude), receives support from close peers (subjective norm), and possesses confidence in the effective implementation of such efforts (perceived behavioral control). This dynamic ultimately enhances motivation (intention) to actively participate in the change process (readiness for change) (Jimmieson et al., 2009).

1. Attitude Towards Behavior (ATB)

Attitude refers to the degree to which an individual has a favorable or unfavorable evaluation of the behavior in question. It encompasses beliefs about the outcomes of performing the behavior and evaluations of these outcomes (Ajzen, 1991). Attitude is the expression of words, gestures, and actions about things, phenomena, and people with valuable evaluations and comments, including perception, influence, and behaviour (Nguyen et al. (2023). If employees have a positive attitude toward digital transformation, they tend to be more receptive to the forthcoming change, and this will increase their digital engagement and readiness (Muehlburger et al., 2022).

2. Subjective Norms (SN)

Subjective norm refers to the perceived social pressure to perform or not perform the behavior (Ajzen, 1991). This includes the influence of significant others such as peers, family members, colleagues, and the motivation to comply with these individuals’ expectations. If a person perceives that people important to them think they should engage in a certain behavior, and the individual values their opinions, they are more likely to form a stronger intention to perform that behavior (Ajzen, 2002).

3. Perceived Behavioral Control (PBC)

Perceived behavioural control refers to the perceived ease or difficulty of performing the behaviour, and it is assumed to reflect experience as well as anticipated barriers and obstacles (Ajzen, 1991). PBC is closely related to the concept of self-efficacy, and it can directly influence both behavioral intention and the actual behavior itself. Self-efficacy represents an individual’s perception of their ability to execute tasks (Ormrod, 2006) or effectively utilize technological improvements. Digital transformation self-efficacy describes an individual’s subjective belief that digital technology can be utilized easily (Oh et al., 2022), encouraging confidence in employees and the organization’s capacity to execute digital transformation. For instance, if a user believes they have the resources, skills, and support necessary to use a new system, they are more likely to adopt it.

Relationship between Attitude Towards Behavior, Subjective Norms, and Perceived Behavioral Control with Employee Digital Transformation Readiness.

Srivasta et al. (2024) applied the Theory of Planned Behavior (TPB) model to examine the intention of employees in the UAE to utilize artificial intelligence (AI), finding that all three independent variables significantly influence employee intention (INT) to adopt AI in the workplace. The results clearly indicate that employees are willing to utilise AI at work, provided they receive appropriate assistance, training, and guidance from their employers. This clearly indicates the employee’s enthusiasm for utilizing AI. The study by Nguyen et al. (2023) concludes that self-efficacy, attitude, employee characteristics, and leadership all have significant positive effects on employee readiness for digital transformation in Vietnamese SMEs, with self-efficacy showing the strongest influence. Suzianti et al.’s (2023) study confirmed the applicability of the TPB in explaining employees’ positive behaviour during organizational transformation. It found that intention has a significant and positive influence on employees’ positive behaviour, serving as the strongest direct predictor. Furthermore, attitude and perceived behavioural control (PBC) significantly influenced intention, indicating that employees are more likely to support transformation when they have a favorable view of it and feel confident in their ability to manage change. In contrast, subjective norms did not significantly affect intention, suggesting that social pressure or peer influence plays a lesser role in this context. Benić (2021) shows that all TPB variables have a significant and positive impact on their intention to engage in online training. Among these, PBC had the strongest influence, indicating that employees are more likely to participate in online training if they feel capable and well-equipped to use the technology involved. While attitudes and social norms also play important roles, the results reveal a noticeable reluctance in actual behavioral intention, particularly when traditional in-person training remains an option. This suggests that despite favorable perceptions and support, employees may still prefer face-to-face learning experiences due to factors like greater engagement or comfort, emphasizing the need for HR departments to design online programs that match or exceed the quality and interactivity of in-person sessions. El-Brassi et al. (2022) in their study found that only attitude and subjective norm had a significant and positive relationship with Libyan banking employees’ readiness to support the transformation to a full-fledged Islamic banking system. Attitude was the strongest predictor, indicating that employees with favorable views about the transformation are more likely to support it. Subjective norms also played a key role, showing that social influences from peers, managers, and societal expectations can enhance readiness. In contrast, perceived behavioral control (PBC) was not significantly related to readiness, suggesting that employees may lack confidence, resources, and sufficient knowledge to engage in the transformation process. The study of Höyng and Lau (2023) does not explicitly apply the TPB. However, it incorporates conceptually similar variables which are perceived usefulness (PU) and perceived ease of use (PEOU) from the Technology Acceptance Model (TAM), which closely align with TPB’s constructs of attitude toward behavior and perceived behavioral control. The findings show that both PU and PEOU significantly and positively influence employees’ intentional digital readiness, the study’s dependent variable representing behavioral intention.

H₁:  There will be a significant positive relationship between Attitude and Employee Digital Transformation Readiness Among SMEs in Malaysia.

H₂: There will be a significant positive relationship between Subjective Norms and Employee Digital Transformation Readiness Among SMEs in Malaysia.

H₃: There will be a significant positive relationship between Perceived Behavioral Control and Employee Digital Transformation Readiness Among SMEs in Malaysia.

Proposed Research Framework

The research framework investigates the antecedents influencing Employee Digital Transformation Readiness among SMEs in Malaysia. A theory involved in this research is the Theory of Planned Behavior (TPB) by Ajzen (1991), which constructs the components of Attitude, Subjective Norms, and Perceived Behavioral Control, which influence employees’ intentions and behaviors toward adopting digital technologies. Attitude reflects employees’ evaluation of digital change, subjective norms involve perceived social pressure from peers and leaders, and perceived behavioral control relates to their confidence in implementing digital technologies.

Figure 3: Proposed Research Framework

RESEARCH METHODOLOGY

This study adopts a quantitative research design to systematically examine factors influencing employee digital transformation readiness in Malaysian SMEs. The target population comprises employees working in SMEs across different sectors, including services, manufacturing, construction, agriculture, and mining. Stratified purposive sampling is employed to ensure representativeness across these sectors, reflecting the proportional distribution of SMEs in Malaysia. Individual employees serve as the unit of analysis. Data will be collected through an online questionnaire consisting of demographic information, attitudes toward digital transformation, subjective norms, perceived behavioral control, and readiness for digital transformation. To minimize self-report bias, respondents will be assured of anonymity, validated scales will be used, and a pilot test will be conducted to refine the instrument. Partial Least Squares Structural Equation Modeling (PLS-SEM) is selected as the analytical technique, as it enables simultaneous testing of complex relationships between variables and is appropriate for exploratory models. This approach strengthens both the theoretical and practical contributions of the study by ensuring methodological rigor and analytical robustness.

CONCLUSION

This study examines employee digital transformation readiness in Malaysian SMEs, recognizing that employees are central to the success of digital initiatives. Grounded in the Theory of Planned Behavior (TPB), the research highlights how attitudes toward behavior, subjective norms, and perceived behavioral control shape employees’ readiness to embrace digital transformation. As SMEs remain vital to Malaysia’s economy but continue to lag in digital adoption, understanding these human factors is essential for bridging the readiness gap. The expected outcomes of this study contribute to theory by extending TPB into the context of SME digital transformation and offering new insights into employee-level determinants of readiness. Practically, the findings will guide SME leaders in developing targeted interventions such as training programs, supportive leadership practices, and communication strategies that enhance workforce confidence and willingness to adopt new technologies. For policymakers, the study provides evidence to support the design of initiatives that build digital capabilities among SME employees, ensuring that Malaysia’s broader digital economy goals can be achieved. In conclusion, this research underscores that digital transformation is not merely a technological shift but a people-driven process. Enhancing employee readiness is therefore a key enabler for SMEs to remain competitive and sustainable in an increasingly digitalized business environment.

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