From Awareness to Impact: A Structural Equation Modeling Approach to the Digitalization of SMEs in the Andaman and Nicobar Islands

Abstract

The Andaman and Nicobar Islands in India, with their unique geographical isolation and limited infrastructure, present a distinct environment for Small and Medium-sized Enterprises. In such a context, digitalization has the potential to transform how local businesses operate, connect with markets, and manage resources. This study aims to explore the determinants that influence the impact of digitalization on SMEs operating in this ecologically sensitive and logistically challenged region. A structured questionnaire was developed with five core dimensions such as awareness, training, usage, investment, and the impact. Primary data was collected from 53 registered SMEs during May 2025. This study used Descriptive Statistics, ANOVA and Correlation to get insights about the data. Further, using Structural Equation Modeling (SEM), this study validated the relationships among constructs and assessed the influence of awareness, training, usage and investment on the impact. The SEM results reveal statistically significant relationships, indicating that awareness and training positively influence digital usage, training drives usage, digital usage significantly boosts investment and investment strongly impacts overall digital outcomes for SMEs. The study underscores the need for structured training programs, policy support, and accessible digital infrastructure to enhance the digital maturity of island-based SMEs.