<![CDATA[The rapid development of digital technologies has transformed the competitive landscape of micro, small, and medium enterprises (MSMEs). Although e-commerce and social media platforms are widely adopted, many green MSMEs struggle to translate digital adoption into sustainable competitive advantage, particularly when digital strategies are not aligned with sustainability values and local cultural identity. This study extends Dynamic Capability Theory by conceptualizing Green Local Branding Capability (GLBC) as a transformation mechanism that enables MSMEs to convert digital capabilities into sustainable competitive advantage. Specifically, this research investigates the role of e-commerce utilization and social media marketing capabilities in developing competitive advantage among sustainability-oriented MSMEs in Bali, where cultural identity and environmental values represent strategic resources. This research employs a quantitative approach involving 200 green MSMEs operating in sustainability- and culture-based sectors in Bali. Data were collected through structured questionnaires and analyzed using Partial Least Squares–Structural Equation Modeling (PLS-SEM) with SmartPLS to examine both direct and indirect relationships among the variables. The results indicate that e-commerce utilization and social media marketing capabilities have significant positive effects on digital-driven competitive advantage, with social media marketing capabilities showing a stronger influence. Green Local Branding Capability (GLBC) demonstrates the strongest direct effect on digital-driven competitive advantage and partially mediates the relationships between digital capabilities and competitive advantage. The study concludes that digital-driven competitive advantage among green MSMEs can be achieved through the integration of digital capabilities and green local branding capability. Embedding sustainability values and local cultural identity within digital strategies enhances competitive positioning. The findings extend Dynamic Capability Theory by highlighting how digital capabilities and Green Local Branding Capability function as strategic capabilities in building sustainable competitive advantage.]]>
