<![CDATA[Micro, small, and medium enterprises (MSMEs) increasingly operate in business environments characterized by digitalization, rapid market change, and intense competition. However, possessing business knowledge alone may not automatically lead to superior performance unless entrepreneurs are able to transform such knowledge into organizational digital capabilities. This study aims to examine the effect of business literacy on MSME performance by investigating the mediating role of digital business capability and the moderating role of entrepreneurial orientation. Business literacy is conceptualized as a multidimensional construct encompassing financial literacy, entrepreneurial literacy, and digital economic literacy. A quantitative explanatory design was employed involving MSME owners and managers operating in Jakarta. Data were collected through structured questionnaires using purposive sampling and analyzed with Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that business literacy has a positive and significant effect on digital business capability and MSME performance. Digital business capability also significantly improves MSME performance and partially mediates the relationship between business literacy and business performance. Furthermore, entrepreneurial orientation strengthens the positive relationship between business literacy and MSME performance, indicating that knowledge produces stronger economic outcomes when entrepreneurs are innovative, proactive, and willing to take calculated risks. The findings extend the knowledge-based view and dynamic capability perspective by explaining how business-related knowledge is transformed into performance through digital organizational capabilities. The study further demonstrates that entrepreneurial orientation acts as an important boundary condition in this process. These findings suggest that MSME development programs should integrate business literacy improvement, digital capability building, and entrepreneurial orientation rather than treating financial, digital, and entrepreneurial training as separate interventions.]]>
