Leveraging Digitalization, Innovation and Absorptive Capacity for Entrepreneurial Performance: Evidence from Halal MSMEs in Indonesia

Rizaldi Yusfiarto (Universitas Islam Negeri Sunan Kalijaga, Yogyakarta, Indonesia)
Jawad Zacaria Salic (Mindanao State University, Marawi City, Philippines)
Ahmad Febriyanto (Universitas Sebelas Maret, Surakarta, Indonesia)

Global Review of Islamic Economics and Business
Vol. 14 No. 1 (2026)

This study aims to analyze the effects of Digital Technology and Absorptive Capacity on Product Innovation Capability and their impact on Entrepreneurial Performance among Halal Micro, Small, and Medium Enterprises (MSMEs). The study adopts a quantitative approach using a survey method of Halal MSME owners and managers. Data were analyzed using Partial Least Squares Structural Equation Modeling. The results show that Absorptive Capacity has a positive and significant effect on both Innovation Capability and Entrepreneurial Performance. In addition, Digital Technology also has a positive and significant effect on Innovation Capability as well as MSMEs Entrepreneurial Performance. However, the findings indicate that Product Innovation Capability does not have a significant direct effect on Entrepreneurial Performance. This suggests that improvements in MSME entrepreneurial performance are driven more by firms’ ability to absorb knowledge and leverage digital technologies than by product innovation alone. This study implies that Halal MSMEs need to strengthen their learning and knowledge management capabilities and optimize the use of digital technologies in order to enhance competitiveness and entrepreneurial performance. Future research is encouraged to further examine the mediating role of Product Innovation Capability or to incorporate other relevant variables.