Agricultural Digitalization and Farm Productivity: Insights from Dynamic Capabilities Theory in the Pakistani Context

Abstract

Purpose: This research examines the effect of agricultural digitalization on farm productivity in Pakistan with the mediating role of Farmer Entrepreneurial Orientation (FEO) and the moderating effect of Agricultural Extension Support (AES). Grounded in Dynamic Capabilities Theory (DCT), the research focuses on the use of three forms of transformation (technological adoption, behavioural capabilities, and institutional support) that collectively enhance agricultural performance.

Design/Methodology/Approach: A quantitative and cross-sectional survey was conducted among 300 smallholder and medium-scale farmers in the provinces of Punjab, Sindh, and Khyber Pakhtunkhwa. A structured questionnaire was used to measure agricultural digitalization, FEO, AES, and farm productivity, utilizing validated scales. Data was analyzed with Structural Equation Modeling (SEM) to evaluate direct, mediating, and moderating relationships.

Findings: Findings show that agricultural digitalization has positive effects on farm productivity and FEO. FEO mediates the relationship between digitalization and productivity to some extent, providing evidence of it being a mechanism of behavior that converts technological adoption into tangible results. Additionally, AES supports the impact of digitalization on FEO, demonstrating that external support improves the ability of farmers to use digital tools effectively. The proposed model explains 51% variance of farm productivity, which highlights the significance of dynamic capabilities in agricultural performance.

Practical Implications: Policymakers and agricultural organizations should pay attention to integrated interventions that include a combination of the deployment of digital technologies, entrepreneurship development, and extension support in order to maximize farm productivity and farm sustainability.

Originality/Value: This study is an extension of DCT to the agricultural context of a developing country that offers empirical evidence on the synergy effects of digitalization, entrepreneurial orientation, and institutional support towards improving farm performance.