<![CDATA[This study aims to analyze the influence of digital transformation and innovation capabilities on the competitiveness of MSMEs and examine the role of strategic adaptation as a mediating variable. This study uses a quantitative approach with a survey method of 230 MSME selected purposive sampling techniques. Data was analyzed using SEM-PLS. The results show that digital transformation and Innovation capabilities have a positive and significant effect on the strategic adaptation and competitiveness of MSMEs. In addition, strategic adaptation has a positive and significant effect on the competitiveness of MSMEs. Indirect effect test showed that strategic adaptation significantly mediated the relationship between digital transformation and the competitiveness of MSMEs and mediated the relationship between innovation capabilities and the competitiveness of MSMEs. The findings of the study confirm that increasing the competitiveness of MSMEs is not enough only through the adoption of digital technology and innovation development, but also requires the ability to adapt strategies, business models, marketing, operations, and human resource competencies to changes in the business environment. This study provides an implication that strengthening digital capabilities and innovation needs to be integrated with strategic adaptability so that MSMEs are able to build and maintain competitive advantages in a sustainable manner.]]>
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