•This study addresses a real-world business problem, the digitalization of SMEs.•Three main SME resources show to positively relate to digitalization.•Digitalization, in turn, positively relates to financial performance.•It also mediates the impact of information technology on financial performance.•A digital strategy or employee skills alone do not foster financial performance. Small and medium-sized enterprises (SMEs) lag behind larger firms when it comes to digitalization. This has negative impacts on firm performance. Despite the economic importance of SMEs, little is known about the antecedents, consequences, and challenges of SME digitalization. We have set three objectives to address this knowledge gap. Drawing on the resource-based view, we first investigate the impact of three main SME resources on digitalization: information technology, employee skills, and digital strategy. Second, we assess the impact digitalization has on financial performance. We then investigate whether digitalization mediates the effect of resources on performance. The results of a survey of 193 SMEs demonstrate how digitalization can impact SME performance, with the three resources positively relating to digitalization. And in turn, digitalization significantly relates to performance, mediating the effect of information technology on performance. It however does not mediate the effect of digital strategy or employee skills on performance.