Abstract:The digital transformation of small and medium-sized enterprises (SMEs) is of great significance to build “professional, elaborate, special and novel” and “little giant” enterprises and realize the improvement of quality and efficiency of digital economy. Based on the upper echelon theory, this study uses the sample data of 280 innovative SMEs in China to analyze the impact of managers’ digital literacy on the digital transformation of SMEs. The results show that managers’ digital literacy promotes the digital transformation of SMEs through the dual mechanism of improving enterprises’ learning and absorption capacity and promoting enterprises’ human capital upgrading, while the direct impact of managers’ digital literacy on the digital transformation of SMEs is not significant. Manager gender and local policy perception moderate the relationship between managers’ digital literacy and human capital upgrading and learning absorptive capacity in SMEs. The conclusions can deepen the interpretation of the digital transformation of SMEs, enrich the relevant research on the influencing factors of the digital transformation of SMEs, and provide empirical evidence for Chinese SMEs to accelerate the digital transformation by cultivating managers’ digital literacy.