Digital transformation strategy (DTS) is widely regarded as a driver of firm innovation, yet the mechanism connecting it to open innovation performance (OII) in small and medium-sized enterprises (SMEs) remains underspecified, particularly in emerging markets. This study develops and tests an integrated model in which digital marketing capability (DMC) and dynamic capability (DC) act as sequential mediators of the DTS–OII relationship, and environmental dynamism (ED) moderates the DC–OII link. Grounded in the resource-based view, the dynamic capabilities view, and the technology–organization–environment framework, the model was tested using partial least squares structural equation modelling (PLS-SEM) on survey data from 450 Vietnamese SMEs. DTS positively affected DMC (β = 0.61) and DC (β = 0.42); DMC positively affected DC (β = 0.58); and DC positively affected OII (β = 0.64). DMC and DC each partially mediated the DTS–OII relationship, and the sequential path DTS→DMC→DC→OII was significant (β = 0.34), supporting a two-stage transmission mechanism. Environmental dynamism positively moderated the DC–OII relationship (β = 0.18), which was stronger under high dynamism. The findings extend the digital-transformation literature by evidencing a sequential capability pathway and offer actionable guidance for SME managers and policymakers in emerging markets.
