Digital transformation has created opportunities and challenges for halal SMEs in Indonesia, particularly regarding their ability to utilize technology and apply Islamic principles to digital business activities. This study aims to analyze the influence of attitudes toward technology, digital capabilities, and environmental factors on the competitive behavior of halal SMEs, as well as test the mediating role of digital Islamic literacy. Using a quantitative approach with an explanatory design, data were collected via questionnaires from 220 active halal SME participants utilizing digital platforms and analyzed using Structural Equation Modeling based on Partial Least Squares (SEM-PLS). The results showed that attitudes toward technology and digital capabilities had a positive significant effect on digital Islamic literacy, whereas environmental factors had no significant effect. Furthermore, attitudes toward technology, environmental factors, and digital Islamic literacy had a positive significant influence on competitive behavior, while digital capabilities had a negative significant influence. Digital Islamic literacy was found to mediate the influence of attitudes toward technology and digital capabilities on competitive behavior but did not mediate the effect of environmental factors. These findings suggest that digital Islamic literacy is an important mechanism in converting digital skills into competitive advantages for halal SMEs in the digital era. Keywords : halal MSMEs, competitive behavior, Sharia digital literacy, digital transformation, PLS-SEM
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