# Environmental Dynamics and Digital Transformation in Lower-Middle-Class Hospitals: Evidence from Indonesia

## TL;DR

Indonesian lower-middle-class hospitals struggle with digital transformation due to weak links between external pressures and internal readiness.

## Contribution

This study reveals that environmental pressures alone are insufficient to drive digital transformation in under-resourced hospitals.

## Key findings

- Environmental dynamism has a weak positive correlation (r = 0.1816) with digital capability in lower-middle-class hospitals.
- Financial constraints, poor ICT infrastructure, and inconsistent staff training hinder digital adoption.
- Policy and internal leadership improvements are needed to support digital transformation.

## Abstract

What are the main findings?
Environmental dynamism shows only a weak positive relationship with digital capability among lower-middle-class hospitals in Indonesia, indicating that external pressure alone does not ensure successful digital transformation.Financial limitations, inadequate ICT infrastructure, and uneven staff training remain the primary barriers preventing hospitals from fully implementing electronic medical records and other digital systems.

Environmental dynamism shows only a weak positive relationship with digital capability among lower-middle-class hospitals in Indonesia, indicating that external pressure alone does not ensure successful digital transformation.

Financial limitations, inadequate ICT infrastructure, and uneven staff training remain the primary barriers preventing hospitals from fully implementing electronic medical records and other digital systems.

What are the implications of the main findings?
Policymakers should complement regulatory mandates with targeted financial incentives and capacity-building initiatives to strengthen hospitals’ digital readiness.Hospital managers must enhance internal leadership, budgeting priorities, and collaboration with technology partners to accelerate equitable digital transformation in the healthcare sector.

Policymakers should complement regulatory mandates with targeted financial incentives and capacity-building initiatives to strengthen hospitals’ digital readiness.

Hospital managers must enhance internal leadership, budgeting priorities, and collaboration with technology partners to accelerate equitable digital transformation in the healthcare sector.

Background/Objectives: Digital transformation is increasingly essential for healthcare organizations to improve operational efficiency and service quality. However, in developing countries such as Indonesia, many lower-middle-class hospitals lag due to limited financial, human, and infrastructural resources. This study examines how environmental dynamism—comprising regulatory changes, market pressures, and technological shifts—affects the digital capabilities of these hospitals. Methods: A quantitative, cross-sectional survey was conducted in Class C and D hospitals across Indonesia. Respondents included hospital directors, deputy directors, and IT heads. Data were collected through structured questionnaires measuring environmental dynamism and digital capability using a six-point Likert scale. Reliability testing yielded Cronbach’s alpha values above 0.96 for both constructs. Correlation analysis was performed to examine the relationship between environmental dynamism and digital capability. Results: Findings reveal a weak positive correlation (r = 0.1816) between environmental dynamism and digital capability. Although external factors such as policy regulations and technological competition encourage digital adoption, hospitals with limited internal resources struggle to translate these pressures into sustainable transformation. Key challenges include low ICT budgets, inconsistent staff training, and insufficient infrastructure. Conclusions: The results suggest that environmental change alone cannot drive digital readiness without internal capacity development. To foster resilient digital healthcare ecosystems, policy interventions should integrate regulatory frameworks with practical support programs that strengthen resources, leadership, and human capital in lower-middle-class hospitals.