The Impact of Digital Transformation on Labor Productivity and Production Cost Reduction in Enterprises in Vietnam: Evidence from SMEs in Hanoi and Neighboring Provinces

Abstract

This study examines the impact of digital transformation (DT) on labor productivity (LP) and production cost reduction (PCR) among small and medium-sized enterprises (SMEs) in Vietnam. Drawing on the resource-based view and dynamic-capabilities theory, a mixed-methods design was applied to integrate qualitative insights and quantitative validation. Semi-structured interviews with 15 SME managers were followed by a survey of 351 SMEs in Hanoi and neighboring provinces, analyzed using SmartPLS 4. Results indicate that DT significantly improves both LP (β = 0.46, p < 0.001) and PCR (β = 0.39, p < 0.001). Digital skills (DS) partially mediate these effects, highlighting that technology yields performance benefits mainly when supported by workforce competence. Moreover, firm characteristics—particularly size and sector—moderate the DT–performance relationship, with medium-sized and manufacturing firms realizing greater efficiency gains. The study contributes to the literature by providing empirical evidence from an emerging economy where research on DT outcomes remains limited. Practically, it underscores the need for SMEs to align digital investments with human-capital development and integrated process management. Policy recommendations emphasize training support, infrastructure enhancement, and phased digital adoption strategies to accelerate Vietnam’s SME digitalization.