Digital Capabilities and Sustainable Business Growth in Emerging Digital Ecosystems: A Comparative Firm-Level Analysis of Lebanon, Iraq, and Egypt

Abstract

Digital transformation is now one of the key engines of entrepreneurial behavior and company development, but there is still a lack of empirical evidence on the creation of digital ecosystems, especially in the Middle East and North African (MENA) region. This paper examines how digital capabilities affect the sustainable development of entrepreneurial ventures and how the relationship changes depending on the three emerging digital ecosystems of Lebanon, Iraq, and Egypt. Data were collected through a structured online questionnaire developed using Google Forms and distributed via email, WhatsApp, and the Prolific research platform to owners, managers, and key decision-makers of small and medium-sized enterprises (SMEs). A total of 250 questionnaires were distributed, yielding 131 responses, of which 22 were excluded after screening for completeness and eligibility. The final analytical sample comprised 109 valid firm-level responses from Egypt (n = 51), Lebanon (n = 34), and Iraq (n = 24). The study quantitatively assesses digital capabilities on several dimensions, including digital infrastructure adoption, data and analytics capabilities, digital product development, and digital revenue integration, and attributes those capabilities to sustainable business growth indicators (the revenue stability, scalability, profitability, and long-term resilience). The results showed that more robust digital capabilities have more significant impacts on sustainable business growth outcomes, whereas basic digitalization has no significant effect. Further, the analysis found no statistically significant moderating effect of ecosystem contextual factors, including institutional quality and digital maturity, on the relationship between digital capabilities and sustainable business growth across Lebanon, Iraq, and Egypt. This study contributes to the body of knowledge of entrepreneurship and sustainability in emerging markets by integrating Resource-Based View, Dynamic Capabilities Theory, and Digital Ecosystem Theory. The findings have practical implications for entrepreneurs and policymakers who aim to use digital transformation to attain sustainable entrepreneurship in the vulnerable and dynamic digital ecosystems.