<![CDATA[Digital transformation has become a strategic imperative for micro, small, and medium enterprises in emerging economies, yet empirical evidence on how it converts into measurable business performance in Indonesia remains fragmented. This study examined the effect of digital transformation on the performance of micro, small, and medium enterprises in Indonesia and tested business model innovation as a mediating mechanism as well as digital literacy as a moderating condition. A quantitative explanatory design was applied to 342 enterprise owners and managers across five provinces, selected through purposive sampling. Data were collected using a five-point Likert questionnaire and analysed with partial least squares structural equation modelling. The measurement model satisfied the criteria of convergent validity, discriminant validity, and composite reliability. The results showed that digital transformation had a positive and significant effect on business performance and on business model innovation, and that business model innovation had a positive and significant effect on business performance. Business model innovation partially mediated the relationship between digital transformation and business performance, while digital literacy significantly strengthened the direct effect of digital transformation on performance. The model explained 61.4 percent of the variance in business performance. These findings indicate that technology adoption alone was insufficient; performance gains emerged when digital initiatives were translated into reconfigured value propositions, revenue mechanisms, and customer interfaces. The study offers practical implications for enterprise assistance programmes that prioritise capability building over the mere provision of digital devices and platforms.]]>
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