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All Journal Khadimul Ummah Journal of Social Dedication EconBank : Journal Economics and Banking International Journal of Economics, Business and Accounting Research (IJEBAR) Jurnal JTIK (Jurnal Teknologi Informasi dan Komunikasi) Budimas : Jurnal Pengabdian Masyarakat DEVICE Duta.com : Jurnal Ilmiah Teknologi Informasi dan Komunikasi Inkubis: Jurnal Ekonomi dan Bisnis Prosiding Seminar Nasional Teknologi Informasi dan Bisnis AMMA : Jurnal Pengabdian Masyarakat
Tri Djoko Santosa
Universitas Duta Bangsa Surakarta
Religion Agriculture, Biological Sciences & Forestry Humanities Chemistry Civil Engineering, Building, Construction & Architecture Computer Science & IT Control & Systems Engineering Decision Sciences, Operations Research & Management Economics, Econometrics & Finance Education Electrical & Electronics Engineering Engineering Industrial & Manufacturing Engineering Law, Crime, Criminology & Criminal Justice Materials Science & Nanotechnology Mechanical Engineering Nursing Physics Public Health Social Sciences Other

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THE ROLE OF INNOVATION CAPABILITY IN ENHANCING SME COMPETITIVE ADVANTAGE: EVIDENCE FROM INDONESIA'S DIGITAL ECONOMY Bangun Prajadi Cipto Utomo; Tri Djoko Santosa; Ilham Sentosa
International Journal of Economics, Business and Accounting Research (IJEBAR) Vol 10 No 2 (2026): IJEBAR: Vol. 10, Issue 2, June 2026
Publisher : LPPM ITB AAS INDONESIA (d.h STIE AAS Surakarta)

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.29040/ijebar.v10i2.20092

Abstract

The rapid advancement of digital technologies has intensified competition among Small and Medium Enterprises (SMEs), requiring firms to continuously innovate, respond effectively to market changes, and leverage organizational knowledge to sustain competitive advantage. Although previous studies have examined these factors independently, limited research has investigated the integrated effects of open innovation, market orientation, and knowledge management on competitive advantage through innovation capability, particularly in emerging economies. This study examines the direct and indirect relationships among these variables using survey data collected from 200 Indonesian SMEs operating in manufacturing, trade, and service sectors. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that open innovation (β = 0.284), market orientation (β = 0.317), and knowledge management (β = 0.298) positively and significantly influence innovation capability. Furthermore, innovation capability significantly enhances competitive advantage (β = 0.412) and partially mediates the effects of the three antecedent variables. The model explains 68.4% of the variance in innovation capability and 74.1% of the variance in competitive advantage. These findings highlight innovation capability as a strategic mechanism that transforms knowledge resources, external collaboration, and market intelligence into sustainable competitive advantage in an increasingly digital economy.
Co-Authors Agus Suyatno Antin Okfitasari, Antin Bangun Prajadi Cipto Utomo Darwina Arshad Erlina Kumala Kusumawati Hartanti, Dwi Ilham Sentosa Moh Muhtarom Nurchim Nurchim Yoga Edy Pratama