ICT-Supported Strategic Management Practices and Their Impact on the Performance of Jordanian SMEs

Small and medium enterprises (SMEs) continue to be very important in the advancement of sustainable economic growth within the rapid pace of globalization and technology advancements, particularly in developing countries. SME's have become increasingly important since the beginning of the industrial boom of the 1970's and 80's as they can provide employment opportunities, contribute to Gross Domestic Product (GDP), enhance innovation, encourage exportation and facilitate a well-balanced distribution of resources. As such, SME's have been identified as catalysts of positive social and economic transformations in the global economy, specifically in areas where there is significant unemployment and limited financial resources available. Typically, SMEs are highly adaptable, innovative and able to adjust to changing market conditions which makes them an essential component of national sustainable development plans.

1.1 The role of SMEs in Jordan’s economy and the challenges of digital transformation

Jordan's SME sector represents an overwhelming percentage (approximately 98%) of registered business entities in Jordan. Additionally, it provides roughly 60 percent of total private sector employment, and contributes almost 40 percent to Jordan's GDP.

Jordan defines and categorizes SMEs based on parameters such as number of employees, annual revenue, amount of investment, and type of activity being conducted. As a result of applying the aforementioned parameters, there are three distinct classifications for businesses operating in Jordan: Micro, Small or Medium-sized, which may represent Trade, Industrial or Service-related activities.

While SMEs are significant contributors to Jordan's economic growth, there are also a number of constraints limiting SME performance. The most notable limitations include, but are not limited to: A Low Degree of Digitalization among SMEs; Institutional Support for SMEs is Limited; There is a Scarcity of Qualified Staff; and a Lack of Exposure to Strategic Management Techniques and Advanced ICT Solutions.

The development of digital economies is now dependent upon the implementation of information and communication technology (ICT), which is becoming an increasingly important component for enhancing the efficiency of SME business operations, competitiveness and ability to respond to changes in market conditions. The implementation of ICT allows SMEs to optimize their internal operations, reduce operational costs, improve relationships between SMEs and customers, accelerate entry into new markets, facilitate innovation, and allow for more effective strategic planning.

Despite the many advantages of implementing ICT, the vast majority of Jordanian SMEs are currently not utilizing all of the capabilities offered through ICT. As a result of not taking advantage of the capabilities provided through ICT, Jordanian SMEs will continue to experience decreased levels of efficiency and sustainability.

1.2 Strategic management and its importance for improving the efficiency of SMEs: Purpose, objectives, prospects

Strategic Management is an organized, goal-oriented process of strategy development, execution, and assessment to meet a firm's objectives under a dynamic external environment; therefore, the strategic management approach is particularly suitable for small and medium-sized enterprises (SMEs) as they can establish a sustainable development model, manage their competitive environment challenges, and seize market opportunities. Strategic management for SMEs has three principal elements: (1) Strategy Formulation (identification of goals, environmental analysis, decision-making regarding direction); (2) Strategy Implementation (resource allocation, project management, and monitoring); and (3) Strategy Evaluation (results analysis, action adjustments, and feedback). There have been numerous empirical studies demonstrating that larger firms actively utilize strategic management and reap substantial benefits from it, such as increased profitability, expanded market share, and enhanced sustainability. In contrast, many SMEs in Developing Countries, including those in Jordan, are not using strategic management because they have very limited financial resources and non-financial resources to use for it. In addition to these resource constraints, many SMEs in Developing Countries also lack knowledge and experience related to strategic planning and management. The use of ICT to facilitate strategic management has the potential to greatly increase the overall performance of SMEs by allowing them to automate their day-to-day operational activities, provide better data analysis, enable communication with stakeholders and customers via the Internet and provide managers with better informed decision-making options. The use of ICT tools for strategic management is an important tool that will allow SMEs to grow and be innovative. However, there is still a need for further scientific research that examines how strategic management affects the adoption of ICT and the subsequent performance of SMEs in Developing Economies. This is why this current study is needed to address the current scientific gap in this field of research. For this reason, the purpose of this study is to examine the impact of strategic management practices, particularly strategy formulation, strategy implementation, and strategy evaluation, when used in combination with ICT on improving the performance of SMEs in Jordan. Therefore, based upon the previous argumentation, it may be concluded that the best combination of strategic management and digital technologies can provide a foundation for long-term sustainable growth and competitiveness of SMEs during the transition to digitalization.

The study examines whether there is an association between the strategic management techniques of SMEs in Jordan, and how they combine these with ICT. The study seeks to demonstrate the interrelationship between the success of strategic management and the digital transformation of SMEs in a developing economy by utilizing ICT as a facilitator of strategic management processes.

Study Object: SMEs in Jordan, operating within different sectors: Manufacturing, trade, and services. According to the Ministry of Industry and Trade of Jordan (2023), SMEs comprise approximately 98% of the total registered businesses in the country. Moreover, SMEs represent over 60% of private sector employees and generate around 40% of the country’s GDP. Since the study focuses on SMEs implementing ICT into their daily operations, for example: Digital accounting, cloud solutions, Customer Relationship Management Systems (CRM), Online Marketing and other digital tools, the primary focus will be on companies that have chosen to utilize ICT as part of their strategic management decisions.

Key Aspects:

- The Impact of Strategic Management on SME Success. The study relies upon the assumption that SME success is a direct result of the quality of strategic decisions made. Strategic planning, implementation, and monitoring enable firms to adapt to rapidly evolving market environments, enhance their competitiveness, and ultimately experience sustainable growth.

- The Role of ICT in the Transformation of Management Practices. In recent years, ICT has become a fundamental part of business management. Digital platforms have provided businesses with the ability to perform data analysis at much higher speeds and automate processes that are traditionally manual; this has allowed for cost reduction, decision-making at accelerated rates and entry into additional market segments. ICT also provides a means by which SME in Jordan can be more flexible and responsive to changing circumstances due to the traditional barriers SMEs have experienced in accessing sufficient amounts of capital.

- Barricades to Implementing ICT in SMEs. Although the potential advantages of implementing ICT exist, many SMEs in Jordan remain at a relatively low level of digital maturity. The most commonly cited barricades include: Limited financial resources, insufficient personnel with IT skills, lack of government support and cultural/behavioral attitudes of business owners.

- The relationship between strategic ICT innovations and productivity. A special consideration will be given to determining how the utilization of ICT in strategic management (e.g., business intelligence systems, dashboards, electronic customer interaction channels) influences the principal performance metrics of SMEs: Profitability, market share, customer satisfaction, innovation activity, etc.

In terms of unanswered questions, the study highlights several underexplored areas in both academic literature and applied business research:

- The lack of empirical evidence regarding the influence of strategic ICT innovations on SME performance in developing economies, specifically in the Middle East. Most prior studies were conducted in countries characterized by a high degree of digitalization and well-developed business environments.

- Lack of a uniform model of integrating strategic management and ICT in SMEs for countries with limited resources and unique social/cultural conditions, similar to the case of Jordan. The standardized models typically employed in Western nations may not necessarily match the realities of the region.

- A low level of digital culture within SME management structures, including a general unawareness among managers of the strategic value of ICT. Many entrepreneurs perceive ICT primarily as an operational tool and not as a method for achieving long-term objectives.

- Lack of government and institutional programs providing training for SMEs to strategically utilize ICT and manage digital projects. Presently, digitalization policies tend to emphasize infrastructure and rarely address management practices.

- Limited accessibility to financing for digital solutions that impedes the transition of SMEs to advanced ICT platforms. While International Organizations such as the IFC and USAID exhibit great interest in supporting the development of digitalization in SMEs, most SMEs are excluded from participating in such initiatives.

Thus, this study aims to fill the existing knowledge gap by offering a contextualized understanding of strategic management using ICT as it applies to SMEs in Jordan, as well as to put forward recommendations for practitioners and policymakers to optimize these processes.

In this study, a structured questionnaire based survey targeted owners and/or managers of small and medium-sized businesses operating in various sectors in Jordan (i.e., manufacturing, trading and service sectors). A purposeful sampling method was utilized to ensure that all respondents had sufficient experience/knowledge of using ICTs within their respective organizations and the process of making strategic decisions related to ICT usage. The questionnaire was distributed via both electronic channels (e.g., e-mail invitation and professional business networks) as well as in-person to organizations located in industrial and commercial areas. Data collection took place during a three-month time frame from March 2025 to May 2025. Out of 412 questionnaires distributed, 354 valid responses were collected, representing a successful response rate of 85.9%. This strong response rate may be attributed to the accessibility of SME's and the relevance of the topic to the operational needs of SMEs. Each response was reviewed for completeness and consistency prior to inclusion into the final data set used for PLS-SEM analysis.

Present-day research in the area of strategic management and ICT require analytical methods that are able to work with latent variables and can handle complex multivariate models. Traditional methods (i.e., regression analysis or correlation analysis) have numerous limitations; 1) They can only analyze one dependent variable at a time. 2) They require normal data distribution and large samples. 3) They do not take into account latent constructs that cannot be measured directly [38].

The main objective of the study: Is to identify the impact of strategic use of ICT on the performance of Jordanian SMEs. Since the key variables (e.g., “strategic flexibility” or “operational efficiency”) are latent constructs, it was decided to use SEM. Of the two main approaches to SEM-CB-SEM (covariance-based) and PLS-SEM (partial least squares), the latter was chosen. PLS-SEM has a number of advantages: Working with small and medium samples (from 50 observations).

No strict requirements for normal distribution.

Ability to work with formative and reflective designs.

Focus on the predictive power of the model, which is important for practical research of SMEs.

Using PLS-SEM allows researchers to combine the internal model (structural model – describes the relationships among the constructs) and the external model (measurement model – describes the relationships between the latent variables and their indicators). The combination of the internal and external models is widely utilized in research relating to behavioral and management sciences [15, 17, 19]. In order to ensure coherence between the theoretical model and empirical model, the researcher needs to articulate the interplay between the three strategic management aspects discussed in the abstract (strategy formulation, strategy implementation, and strategy evaluation), as well as how these relate to the constructs modeled in the structural model. The theoretical strategic management cycle forms the base of the empirical model; however, the empirical model examines the mechanisms by which ICT can influence both strategic and operational outcomes for SMEs. The mechanism of strategic flexibility represents a firms’ ability to transform strategic formulation and implementation into adaptive capabilities; operational efficiency is the extent to which the firm can execute measurable performance improvement by implementing a strategy. Therefore, ICT → SF → OE → FP does not deviate from the strategic management model; instead, the study presents an empirical breakdown of how digital technologies facilitate the process of strategy formulation, strategy execution, and strategy evaluation in SMEs. This integration maintains that the conceptualization of the study's theoretical foundations and empirical findings are empirically aligned.

The general structural model of the study can be described by a system of equations:

$\mathrm{SF}=\beta_1 \cdot \mathrm{ICT}+\varepsilon_1$              (1)

$O E=\beta_2 \cdot S F+\varepsilon_2$              (2)

$F P=\beta_3 \cdot O E+\varepsilon_3$               (3)

where, ICT-use of ICT in strategic management; $S F$ strategic flexibility; $O E$-operational efficiency; $F P$ financial performance; $\beta i$-standardized path coefficients; $\epsilon i$-model errors.

All latent variables were investigated through observable indicators measured on a 5-point Likert scale.

ICT-Usage → 5 indicators

Strategic Flexibility → 4 indicators

Operational Efficiency → 4 indicators

Financial Performance → 4 indicators

To test the reliability and validity of the model, the following were used:

1. Factor loadings (λ_i):

$\lambda_{\mathrm{i}}=\frac{\operatorname{Cov}\left(\mathrm{X}_{\mathrm{i}}, \eta\right)}{\operatorname{Var}(\eta)}$               (4)

2. Composite Reliability (CR):

$C R=\frac{\left(\sum \lambda_i\right)^2}{\left(\sum \lambda_i\right)^2+\sum \theta_i}$               (5)

3. Average Variance Extracted (AVE):

$A V E=\frac{\left(\sum \lambda_i\right)^2}{\sum \lambda_i^2+\sum \theta_i}$               (6)

Factor loadings $\left(\lambda_i\right)$ demonstrated significant relationships between the indicators and their latent variables, which confirms the correctness of the measurement tool development (Table 1).

Table 1. Reliability and validity of the construct

CR values exceed 0,7, indicating internal consistency of the scales and the absence of random differences between the indicators. AVE exceeds 0.5 for all constructs, indicating sufficient convergent validity: each latent variable explains more than half of the variation in its indicators. Thus, the measurement model has high statistical validity and provides a basis for the correct construction of the structural model [39]. This allows us to interpret the relationships between ICT use, strategic flexibility, operational efficiency and financial performance of SMEs with a high degree of confidence, minimizing the risk of methodological distortions. After confirming the reliability of the measurement model, a structural model was built reflecting the research hypotheses. The main goal of this stage is to assess the impact of ICT use on SME performance through mediating variables.

3.1 Research hypotheses

H1: ICT use has a positive impact on strategic flexibility (ICT → SF).

H2: Strategic flexibility has a positive impact on operational efficiency (SF → OE).

H3: Operational efficiency has a positive impact on financial performance (OE → FP).

H4: The impact of ICT on financial performance is indirect through SF and OE.

After hypotheses were put forward, a structural model was built to reflect the expected relationships between ICT use, strategic flexibility, operational efficiency, and financial performance of Jordanian SMEs. PLS-SEM was chosen as the main analytical tool because it allows for simultaneous assessment of direct and indirect effects, handling latent variables and relatively small samples, and accounting for mediator and moderator dependencies in complex models.

The model was built in two stages:

Testing the measurement model to assess the reliability and validity of the constructs (the results were confirmed in the previous step); Evaluation of the structural model, including hypothesis testing, path coefficient analysis (β), and calculation of statistical significance indicators. At the second stage, a bootstrapping procedure was performed with 5,000 repeated samples, which allowed obtaining t- and p-values for all hypotheses. This approach ensures the robustness of the results and reduces the risk of errors associated with the characteristics of the data distribution. Testing the significance of path coefficients (β) is a key step in interpreting the model. In line with recommendations by [34, 36, 37], values of t > 1,96 and p < 0,05 indicate statistical significance. For each hypothesis, direct, indirect, and total effects were calculated, allowing us to determine both the direct and indirect impact of ICT on SME performance. The results of the next stage of the analysis include calculating path coefficients, testing them statistically, and assessing the contribution of each factor to explaining the variance of the dependent variables.

After formulating hypotheses and building a structural model, the next step was to conduct a quantitative assessment of the path coefficients (β) and test their statistical significance. This process is crucial, since it is on this basis that conclusions are formed about the empirical confirmation or rejection of the proposed research hypotheses. The analysis tool used was PLS-SEM, which provides simultaneous work with measurement and structural models, allows you to analyze both direct and indirect effects, and is also resistant to data deviations from the normal distribution. Path coefficients (β) reflect the strength and direction of the relationship between latent variables [40-42]. Their assessment in PLS-SEM occurs in stages:

• Initialization of indicator weights for each latent variable.
• Calculation of external and internal approximations, where external ones are responsible for factor loadings, and internal ones are responsible for the interrelations of latent variables.
• Iterative optimization of weights until stability is achieved.
• Calculation of standardized path coefficients (β) for all hypotheses of the model [43, 44].

Mathematically, the path assessment can be represented as:

$\widehat{\beta_{x y}}=\frac{\operatorname{Cov}(X, Y)}{\sigma_X \cdot \sigma_Y}$               (7)

where, $\widehat{\beta_{x y}}$ is the standardized coefficient of influence of variable $X$ on $Y ; \sigma_X$ and $\sigma_Y$ are the standard deviations of the latent variables. To confirm the hypotheses, it is necessary to make sure that the found path coefficients are statistically significant. PLS-SEM uses the bootstrapping method, which involves multiple random resampling with replacement. Based on bootstrapping, the following are calculated:

• t-value - the ratio of the path coefficient to its standard error;
• p-value - the probability of a type I error when rejecting the null hypothesis.

Significance criteria: t > 1, 96 at a significance level of 5%; p < 0.05 to confirm the hypothesis:

$t=\frac{\hat{\beta}}{S E(\hat{\beta})}$               (8)

where, $\operatorname{SE}(\widehat{\beta})$ is the standard error of the path coefficient calculated based on the bootstrapping results. Based on the results of the analysis, the following path coefficients and statistical indicators were obtained, which are presented in Table 2.

Table 2. The path coefficients assessment and statistical indicators

Analysis of the table shows that all direct relationships are significant, which confirms the stability of the model [45, 46]. The influence of operational efficiency on financial performance was especially strong (β = 0.539), which demonstrates the key role of internal business processes in the formation of SME profits.

The developed and applied research methodology demonstrates a comprehensive and innovative approach to analyzing the impact of using ICT on the performance of SMEs in the context of the modern digital economy. The main novelty of the methodological approach lies in the integration of PLS-SEM methods, a multi-stage assessment of validity and reliability, as well as mediator analysis, which made it possible to identify the indirect nature of the impact of ICT on the financial performance of SMEs through strategic flexibility and operational efficiency.

The key features of the proposed methodology are:

• Systemic nature of the analysis. The methodology combines the stages of testing the measurement model, assessing the structural model, testing hypotheses, identifying mediator effects and assessing the quality of the model (R², Q², f²). This approach provides a complete understanding of the mechanism of the influence of ICT on business performance.

• Use of latent variables and complex statistics. The use of PLS-SEM allowed us to take into account variables that cannot be measured directly (for example, strategic flexibility) and evaluate them through a system of indicators, which increases the accuracy of the analysis and reflects complex management processes.
• Verification of the absence of systematic measurement error. Conducting Harman’s one-factor test and additional procedures to reduce Common Method Bias (CMB) guaranteed high reliability of the collected data and the elimination of distortions associated with the questionnaire [47, 48].
• Mediation analysis and identification of indirect relationships. Unlike traditional regression approaches, the proposed methodology allowed us to identify the critical role of strategic and operational efficiency as intermediate links that convert digital investments into real financial results.

3.2 Practical applicability

The methodology was developed with an eye to implementation in the management practice of SMEs. Company managers can use its results to: Assess the current level of digital maturity of the business; Identify bottlenecks in operational processes; form an ICT implementation strategy with a priority on increasing flexibility and operational efficiency, and not only on technological modernization. Adaptability to various contexts. Although the empirical basis of the study is related to SMEs in Jordan, the proposed methodology can be adapted to other countries with a developing digital economy, which expands its universality and scientific significance. As a result of applying this methodology, a holistic picture of the transformational effect of ICT on the business indicators of SMEs was obtained. The methodology allows not only to confirm or refute hypotheses, but also to identify hidden mechanisms of the influence of digitalization, to form recommendations for strategic management and to build guidelines for further digital transformation of business [49]. Thus, the proposed methodological approach combines deep academic elaboration and high practical applicability, which makes it a relevant tool for both researchers and practitioners in the field of SME management in the digital economy.

3.3 Limitations of the research methodology

Despite the high complexity and practical significance of the developed methodology, the study has a number of limitations that should be taken into account when interpreting the results and in subsequent attempts at replication.

• Use of a cross-sectional design. Data collection was implemented in the form of a single cross-sectional survey, which limits the possibility of strict conclusions about the cause-and-effect relationships between the variables. Although the PLS-SEM methodology allows for the assessment of complex structural dependencies, the identified relationships reflect correlational rather than strictly causal effects.
• Self-report bias. The survey of respondents in Jordanian SMEs involves subjective perceptions of ICT use, strategic flexibility, and business performance. Despite the measures taken to reduce CMB, including Harman’s one-factor test and procedural measures (guarantee of anonymity, wording of questions in a neutral form), the risk of systematic distortions of responses cannot be completely excluded.
• Limited sample and context of the study. The empirical base is limited to Jordanian SMEs, which imposes certain geographical and economic limitations. The impact of ICT on SMEs in countries with different levels of digitalization, regulation, and competitive environments may manifest itself differently. Therefore, generalizing the results to other markets requires caution and additional cross-cultural research.
• Specifics of measuring latent variables. The PLS-SEM methodology relies on a system of indicators to estimate latent constructs. Despite the reliability and validity checks, the quality of the model depends on the accuracy of the selected indicators. Possible omissions or excessive correlation between them may affect the accuracy of the path coefficients.
• Lack of dynamic analysis. The proposed methodology does not take into account time lags and the dynamics of digital transformation, although the impact of ICT on the financial performance of SMEs may manifest itself with a delay. Longitudinal studies could strengthen the evidence base and reveal the cumulative effect of digitalization.

Taken together, these limitations do not diminish the scientific value of the methodology but suggest directions for further research, including larger samples, longitudinal designs, and cross-cultural comparisons.

3.4 Prospects for the development of research methodology

The proposed methodological approach to analyzing the impact of ICT on the efficiency of SMEs has significant potential for further development and adaptation to the changing conditions of the digital economy. First of all, a promising direction is the integration of longitudinal studies that will allow us to trace the dynamics of SME transformation under the influence of ICT and identify the cumulative effect of digitalization on strategic and operational efficiency. The next direction is to expand the methodology to multicultural and inter-industry contexts, which will take into account differences in the levels of digital maturity of companies and in the institutional environment [50, 51]. The inclusion of international samples will make it possible to build comparative models and identify specific and universal mechanisms of ICT influence. Also promising is the combination of PLS-SEM with machine learning and big data analysis methods, which will enhance the predictive power of models and allow processing unstructured data, including digital footprints of companies on the Internet and the results of automated monitoring of business processes. Thus, further development of this approach can contribute to a deeper scientific understanding of the digital transformation of SMEs, as well as the creation of practical tools to support strategic decisions in the context of accelerating technological change.

The research results reveal a complex interdependence between digital transformation and SME performance in the Jordanian context. They confirmed that even partial integration of modern ICT solutions has a significant impact on major SME activity areas. For example, automation of accounting, planning, and logistics processes reduces operational expenses and the possibility of error; the application of CRM systems and e-platforms improves the quality of communication and builds customer trust. Basic business analytics (limited by the availability of resources) provides the opportunity for a better forecast of consumer demand and more informed strategic decisions based on available information. The uniqueness of Jordanian SMEs lies in a combination of limited resources, various levels of infrastructure heterogeneity and cultural specifics affecting the speed of ICT implementation. Small-staffed SMEs with limited specialization have to implement solutions that fit their size; they usually opt for cloud services and mobile apps as cheaper alternatives to enterprise software. Human element is still the most critical to success: employees’ level of digital literacy, their willingness to adopt changes and managers' ability to adapt and integrate new technologies play a crucial role in determining the effectiveness of strategic management methods. Companies, where digitalization was combined with employee education and optimization of internal processes, showed a noticeable improvement in productivity, shortened time to fulfill orders and enlarged the scope of their customer bases. The comparison with international experience shows that Jordanian SMEs are at the initial stage of digital transformation, whereas in developed countries, ICT is already a full-fledged component of strategic management supporting the development of innovative business models. Enterprises from developing economies structurally similar to Jordan demonstrate a faster implementation of cloud technologies, mobile solutions and marketplaces, thus enabling them to rapidly overcome the limitations imposed by local infrastructure. This suggests a large potential for catching up in the development of Jordanian companies if there is targeted governmental support and if digital education programs are expanded. The research results confirm that strategically applied ICT can provide Jordanian SMEs not only with greater operational efficiency, but also with lasting competitive advantages. As such, digital transformation becomes a natural part of modern management, providing enterprises with greater flexibility to respond to changes in the market environment, creating new products and services, and integrating into regional and global value chains. Therefore, one of the main directions of future development should be the creation of a digital corporate culture, combining the technological equipment of SMEs with the education of personnel able to effectively utilize new managerial tools. In this way, ICT-based strategic management methods become for Jordanian SMEs a tool for continuous optimization, and also a basis for sustainable growth and innovation.