<![CDATA[Food Micro, Small, and Medium Enterprises (MSMEs) play a strategic role in Indonesia’s economy; however, increasing market competition, digital transformation, and changing consumer preferences require food SMEs to continuously strengthen their innovation capabilities to sustain competitiveness. Despite the growing importance of innovation, limited studies have simultaneously examined the combined effects of innovation capability, market orientation, ecosystem support, and digital literacy on product innovation and competitive advantage in the food SME sector. This study aims to investigate the influence of innovation capability, market orientation, ecosystem support, and digital literacy on product innovation and further examine the mediating role of product innovation in strengthening competitive advantage among food SMEs in Bali, Indonesia. This study employed a quantitative research design using a cross-sectional survey approach involving 180 food SMEs operating in Denpasar, Badung, and Gianyar, Bali Province. Data were collected through purposive sampling and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4.0 software. The findings reveal that innovation capability, market orientation, ecosystem support, and digital literacy significantly and positively influence product innovation. Among these predictors, innovation capability demonstrates the strongest effect on product innovation. Product innovation further emerges as the strongest determinant of competitive advantage, while innovation capability also exerts a significant direct effect on competitive advantage. The model explains 74.3% of the variance in product innovation and 68.1% of the variance in competitive advantage, indicating substantial explanatory power. The study contributes to the literature by integrating internal organizational capabilities and external support mechanisms within a unified framework to explain food SME competitiveness in emerging markets.]]>
