<![CDATA[Objective: This study examines how social capital and entrepreneurial orientation influence innovation and competitive advantage among batik entrepreneurs in Sidoarjo Regency, Indonesia. The article addresses the need to explain how relational resources and entrepreneurial behavior strengthen the competitiveness of traditional creative SMEs facing imitation, market pressure, and changing consumer preferences. Design/Methods/Approach: The study used a quantitative explanatory design and census-based sampling of active batik entrepreneurs in Sidoarjo Regency. Data were collected through a five-point Likert questionnaire and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS. The model evaluated the effects of social capital and entrepreneurial orientation on innovation and competitive advantage. Findings: Social capital has a positive and significant effect on innovation, but does not directly affect competitive advantage. Entrepreneurial orientation significantly affects both innovation and competitive advantage, while innovation significantly improves competitive advantage. These results indicate that social capital becomes strategically valuable when it is converted into innovation outcomes. Originality/Value: The study contributes to the SME and creative-industry literature by jointly examining social capital and entrepreneurial orientation within a single model in a localized batik cluster. It also clarifies that innovation functions as a connecting mechanism through which intangible resources contribute to competitive advantage. Practical/Policy implication: Batik entrepreneurs should strengthen trust-based networks and entrepreneurial behavior while continuously transforming those resources into product, process, and managerial innovation. Local support institutions can enhance competitiveness by facilitating collaborative forums, developing capabilities, and providing innovation-oriented support for batik SMEs. Keywords: Batik SMEs; competitive advantage; entrepreneurial orientation; innovation; social capital JEL Classification: L26; M13; O31]]>
