Abstract:    Today, when digital transformation has become a global consensus, governments of all countries have vigorously promoted their own firms to carry out digital transformation. Many SMEs facing resource constraints have sought to build political connections in the process of digital transformation, but the political connections of SMEs have shown very different impacts on their digital transformation. In theoretical studies, there is a significant gap between political connections and digital transformation, and the existing literature has mostly focused on emphasizing the positive or negative effect of political connections, while the effect of political connections on the digital transformation of SMEs has been less analyzed from the integration of both positive and negative perspectives. Therefore, the top priority for theoretical research is to explore whether political connections can promote the digital transformation of SMEs and how the connections work to influence the process. In view of this, based on the subdivision types of political connections and starting from the antecedent variable of political connections, this research focuses on SMEs to explore "the effect and mechanism of direct and indirect political connections on the digital transformation of SMEs", which strives to reveal the dual effect of the "helping" and "grabbing" hands of political connections on the digital transformation of SMEs, in order to uncover the black box of the complex mechanism between political connections and the digital transformation of SMEs.
    Starting from the perspectives of resource reconstruction and capability remodeling of digital transformation, based on resource-based theory and firm capability theory, this research, through literature research and theoretical deduction, and based on the double-edged sword effect of political connections, constructs theoretical model of the digital transformation of SMEs. This theoretical model is influenced by the mediating role of direct and indirect political connections in policy-sensing capability and market-sensing capability, and it also reinterprets the effect of two different types of political connections and their conflicting political connections.
    In this research, data were collected through questionnaire survey, and valid questionnaires were obtained from a total of 315 Chinese SMEs. Hierarchical regression analysis was performed on the data to test the hypotheses, and the mediation effect was further tested using Bootstrap method as suggested by Preacher and Hayes. The empirical results show that, on the one hand, direct political connections positively affect SMEs′ policy-sensing capability and negatively affect SMEs′ market-sensing capability, and that the above two capabilities play a completely mediating role between direct political connections and the digital transformation of SMEs. Direct political connections can only better promote the digital transformation of SMEs when they are transformed into policy-sensing capability of SMEs without affecting their market perception capabilities; On the other hand, indirect political connections positively affect SMEs′ policy-sensing capability and market-sensing capability, and these two capabilities play a partially mediating role between indirect political connections and the digital transformation of SMEs. The effect of indirect political connections on the digital transformation of SMEs is partly achieved through policy-sensing capability and market-sensing capability, and both are beneficial to the digital transformation of SMEs.
    The theoretical significance of this research lies in: firstly, this research, starting from the antecedent variable of political connections, clarifies the effect of direct political connections and indirect political connections on the digital transformation of SMEs and its mechanism, which provides a new perspective of political connections for the digital transformation of SMEs; Secondly, this research deepens the understanding of the effect of double-edged sword effect of political connections on the digital transformation of SMEs from the segmentation perspective of direct and indirect political connections. Direct political connections have a double-edged sword effect, but indirect political connections do not; Finally, by introducing policy-sensing capability and market-sensing capability as parallel mediating variables, this research explains how the helping hand and grabbing hand of political connections can ultimately affect the digital transformation process of SMEs by effecting their policy-sensing capability and market sensing capability, and thus reveals the complex mechanism of the role of political connections on the digital transformation of SMEs.
     The practical value of this research lies in: firstly, SMEs need to realize that direct political connections have an extremely strong double-edged sword effect on their digital transformation. In the process of digital transformation, SMEs need to make full use of the facilitating effect of direct political connections on policy-sensing capability, and circumvent the inhibiting effect of direct political connections on market-sensing capability as much as possible, so as to maintain the vitality of enterprises while obtaining resources; Secondly, SMEs need more indirect political connections in the process of digital transformation by keeping close to the government, staying away from politics, and building a cordial and clean relationship between government and business, to obtain policy support through indirect political connections and avoid excessive inhibition of direct political connections on market-sensing capability; Finally, government agencies need to avoid excessive direct intervention in the digital transformation of SMEs.
    This research only uses cross-sectional data for quantitative analysis from the perspectives of resources and capabilities. Future studies can introduce moderating variables and use other perspectives or use longitudinal case studies to explore the impact of political connections on the digital transformation of SMEs.

Key words:  digital transformation, political connection, policy-sensing capability, market-sensing capability, small and medium-sized enterprise (SME)