Digital Transformation, Innovation, and Competitive Advantage: Enhancing MSME Performance in Bitung, North Sulawesi
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Abstract
Micro, small, and medium enterprises (MSMEs) serve as vital components of the Indonesian economy, particularly in Bitung City, North Sulawesi. The dynamics of global competition, shifts in consumer behavior, and digital disruption necessitate that MSMEs embrace digital transformation and innovation. This study seeks to examine how digital transformation and innovation impact the performance of MSMEs, with competitive advantage acting as a mediating factor. Utilizing a quantitative approach, the research involved surveys conducted with 113 MSME operators in Bitung. Data were analyzed using Structural Equation Modelling–Partial Least Squares (SEM-PLS). Findings indicate that digital transformation significantly enhances both competitive advantage and performance. While innovation positively influences competitive advantage, it does not have a direct effect on performance. The study confirmed that competitive advantage mediates the relationship between digital transformation and innovation in relation to MSME performance. These results highlight that digital transformation serves as the foundation, with innovation acting as a catalyst, and competitive advantage being crucial for sustainably improving the performance of MSMEs
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How to Cite
Sumakul, G. C., Hibrida, A. R., & Kolinug, F. C. (2025). Digital Transformation, Innovation, and Competitive Advantage: Enhancing MSME Performance in Bitung, North Sulawesi. ProBisnis : Jurnal Manajemen, 16(5), 971–981. Retrieved from https://ejournal.joninstitute.org/index.php/ProBisnis/article/view/1133
References
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Babalola, O. O., Amiolemen, S. O., Adegbite, S. A., & Ojo-Emmanuel, G. (2015). Evaluation of factors influencing technological innovations of small and medium enterprises in Nigerian Industrial Estates. International Journal of Innovation Science, 7(1), 39–53. https://doi.org/10.1260/1757-2223.7.1.39
Batubara, F. H. (2022). UTILIZATION OF DIGITAL TECHNOLOGY IN DEVELOPING MARKETING STRATEGIES FOR MSME PRODUCTS. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 6(3). https://doi.org/10.31955/mea.v6i3.2569
Božić, L., & Rajh, E. (2016). The factors constraining innovation performance of smes in Croatia. Economic Research-Ekonomska Istrazivanja, 29(1), 314–324. https://doi.org/10.1080/1331677X.2016.1168040
Chirico, F., Naldi, L., Hitt, M. A., Sieger, P., Sirmon, D. G., & Xu, K. (2024). Orchestrating resources with suppliers for product innovation. Journal of Product Innovation Management, 41(4), 735–767. https://doi.org/10.1111/jpim.12703
Citra Dewi, G., Bernardus, D., Sugiyono Agus Purwono, B., & Nova Yatna, C. (2023). POST-PANDEMIC MSME BUSINESS STRATEGY: DIGITAL MARKETING INNOVATION AND TRANSFORMATION. Jurnal Ekonomi, 12(01).
Han, Y.-C. (2011). Innovation:The way to enhance the core competitiveness of SMEs in the post-financial crisis era. BMEI 2011 - Proceedings 2011 International Conference on Business Management and Electronic Information, 1, 581–584. https://doi.org/10.1109/ICBMEI.2011.5917003
Hidayat, M. S., Sudarmiatin, S., & Mukhlis, I. (2022). Internationalization of UD Aida Furniture MSMEs in Pasuruan East Java Indonesia: Its Process and Development. JOURNAL OF ECONOMICS, FINANCE AND MANAGEMENT STUDIES, 05(12). https://doi.org/10.47191/jefms/v5-i12-24
Jiang, L., Li, B., & Zhang, M. (2025). The impact of digital transformation on the efficiency of corporate resource allocation: Internal mechanisms and external environment. Technological Forecasting and Social Change, 215. https://doi.org/10.1016/j.techfore.2025.124107
Jiang, W., & Li, J. (2024). Digital transformation and its effect on resource allocation efficiency and productivity in Chinese corporations. Technology in Society, 78. https://doi.org/10.1016/j.techsoc.2024.102638
Katiandagho, S., Kumenaung, A. G., & Rotinsulu, D. Ch. (2019). ANALISIS KONTRIBUSI SEKTOR PERIKANAN TERHADAP PDRB DAN PENYERAPAN TENAGA KERJA DI KOTA BITUNG. JURNAL PEMBANGUNAN EKONOMI DAN KEUANGAN DAERAH, 19(9). https://doi.org/10.35794/jpekd.23440.19.9.2019
Kawane, T., Adu-Gyamfi, B., Cao, Y., Zhang, Y., Yamazawa, N., He, Z., & Shaw, R. (2024). Digitization as an Adaptation and Resilience Measure for MSMEs amid the COVID-19 Pandemic in Japan: Lessons from the Food Service Industry for Collaborative Future Engagements. Sustainability (Switzerland), 16(4). https://doi.org/10.3390/su16041550
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Langelo, L., Ngangi, C. R., & Rengkung, L. R. (2024). Agro Digitalization Capability Of The Umkm Sector In Bitung City In The Era Of Digital Agro Economy. Jurnal Agroekoteknologi Terapan, 5(1). https://doi.org/10.35791/jat.v5i1.53993
Leão, P., & da Silva, M. M. (2021). Impacts of digital transformation on firms’ competitive advantages: A systematic literature review. Strategic Change, 30(5), 421–441. https://doi.org/10.1002/jsc.2459
Lu, H., & Shaharudin, M. S. (2024). Role of digital transformation for sustainable competitive advantage of SMEs: a systematic literature review. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2419489
Martínez-Costa, M., Jiménez-Jiménez, D., & Dine Rabeh, H. A. (2019). The effect of organisational learning on interorganisational collaborations in innovation: an empirical study in SMEs. Knowledge Management Research and Practice, 17(2), 137–150. https://doi.org/10.1080/14778238.2018.1538601
NAWANGSARI, L. C., SISWANTI, I., & SOELTON, M. (2023). HUMAN RESOURCES MANAGEMENT STRATEGY FOR BUSINESS SUSTAINABILITY IN MSMES. ICCD, 5(1). https://doi.org/10.33068/iccd.v5i1.599
Octasylva, A. R. P., Yuliati, L. N., Hartoyo, H., & Soehadi, A. W. (2022). Innovativeness as the Key to MSMEs’ Performances. Sustainability (Switzerland), 14(11). https://doi.org/10.3390/su14116429
Putra, A. R., & Darmawan, D. (2022). Competitive Advantage of MSMEs in Terms of Technology Orientation and Entrepreneurship Competence. In ISSE International Journal of Service Science (Vol. 2, Issue 1).
Rahayuningsih, S. (2020). Animation media of animal husbandry thematic science learning to stimulate scientific attitude in early childhood. International Journal of Scientific and Technology Research, 9(2), 5879–5882. https://www.scopus.com/inward/record.uri?eid=2-s2.0-85079884518&partnerID=40&md5=46826c0bb9ce1f967f25d88a4afd1e95
Rokhman, M. T. N., Ratnawati, R., & Rahayu, Y. N. (2023). RELATIONSHIP BETWEEN HUMAN CAPITAL AND MSMES PERFORMANCE WITH COMPETITIVE ADVANTAGE AS A MEDIATION. Jurnal Aplikasi Manajemen, 21(1). https://doi.org/10.21776/ub.jam.2023.021.1.14
S. Syahyono, S. S. (2019). The Effect Of Structural Capital And Creative Innovation On Increasing Business Performance Of The Cibaduyut Shoes Fashion Industry In Bandung City. Fair Value: Jurnal Ilmiah Akuntansi Dan Keuangan, 1(2). https://doi.org/10.32670/fairvalue.v1i2.1192
Saputra, M. H., Utomo, M. N., Ariansyah, K., Wismayanti, Y. F., & Ansyah, R. H. A. (2024). Small and medium-sized enterprises dynamic capabilities and competitive advantage: The mediating effect of digitalization. Entrepreneurial Business and Economics Review, 12(3), 41–67. https://doi.org/10.15678/EBER.2024.120303
Sultan, A., Bhat, A., & Gautam, K. (2021). Collaboration Competency as a Driver for Improving Performance of Small-Medium Enterprises in Resource Constraint Economies: An Exploratory Study. SCMS Journal of Indian Management, 18(4), 57–67. https://www.scopus.com/inward/record.uri?eid=2-s2.0-85126565735&partnerID=40&md5=8af93cc84121ff10728765dbadfe49de
Susanti, E., Mulyanti, R. Y., & Wati, L. N. (2023). MSMEs performance and competitive advantage: Evidence from women’s MSMEs in Indonesia. Cogent Business and Management, 10(2). https://doi.org/10.1080/23311975.2023.2239423
Syukron, S., Zarkasih, A., Nasution, S. L., Siregar, M. R., & Munthe, R. S. (2022). Strategi Pemasaran Produk Di Era Digital Pada UMKM. COMSEP: Jurnal Pengabdian Kepada Masyarakat, 3(2). https://doi.org/10.54951/comsep.v3i2.282
Taiwo Agwu, J. N., Mercy, A., & Evawere, A. (2016). The role of ICTS in the improvement of the competitiveness of SMEs. Asian Journal of Information Technology, 15(18), 3414–3421. https://doi.org/10.3923/ajit.2016.3414.3421
Toha, M., & Habibah, N. J. (2023). MSME EMPOWERMENT AND DEVELOPMENT PROGRAM TO INCREASE CONSUMER SATISFACTION. Sahwahita: Community Engagement Journal, 1(1).
Traboulsy, O. R. (2023). The Role of Resource Acquisition in Achieving Sustainable Competitive Performance for SMEs in an Emerging Market: A Moderated Mediation Analysis. Sustainability (Switzerland), 15(16). https://doi.org/10.3390/su151612302
Van Auken, H., Madrid-Guijarro, A., & García-Pérez-de-Lema, D. (2008). Innovation and performance in Spanish manufacturing SMEs. International Journal of Entrepreneurship and Innovation Management, 8(1), 36–56. https://doi.org/10.1504/IJEIM.2008.018611
Wehantouw, G. J. M., Porajouw, O. . , & Taroreh, M. L. G. (2021). PERANAN SEKTOR PERTANIAN TERHADAP PEREKONOMIAN DI KOTA BITUNG. AGRI-SOSIOEKONOMI, 17(2). https://doi.org/10.35791/agrsosek.17.2.2021.33778
Woschke, T., Haase, H., & Kratzer, J. (2017). Resource scarcity in SMEs: effects on incremental and radical innovations. Management Research Review, 40(2), 195–217. https://doi.org/10.1108/MRR-10-2015-0239
Wulandari, R., & Koe, W.-L. (2022). The Factors that Influence the Intention of Marketing and Technological Innovation in MSMEs. Marketing and Management of Innovations, 13(4). https://doi.org/10.21272/mmi.2022.4-12
Xuan, T. G., Yanova, O., & Khaliev, M. (2024). Digital business transformation: impact of IT solutions on business processes and ecology. BIO Web of Conferences, 138. https://doi.org/10.1051/bioconf/202413803015
Yaskun, M., Sudarmiatin, Hermawan, A., & Rahayu, W. P. (2023). THE EFFECT OF MARKET ORIENTATION, ENTREPRENEURIAL ORIENTATION, INNOVATION AND COMPETITIVE ADVANTAGE ON BUSINESS PERFORMANCE OF INDONESIAN MSMEs. International Journal of Professional Business Review, 8(4). https://doi.org/10.26668/businessreview/2023.v8i4.1563
Zhang, C., & Deng, Y. (2024). How does digital transformation affect firm technical efficiency? Evidence from China. Finance Research Letters, 69. https://doi.org/10.1016/j.frl.2024.106069
Zhang, J., & Chen, Z. (2024). Exploring Human Resource Management Digital Transformation in the Digital Age. Journal of the Knowledge Economy, 15(1). https://doi.org/10.1007/s13132-023-01214-y
Zhou, Y., Lyu, J., & Li, L. (2025). Can digital transformation enhance labor productivity in enterprises: An analysis from the perspective of business process reengineering. PLOS ONE, 20(6 JUNE). https://doi.org/10.1371/journal.pone.0325484
Armiani, A., Basuki, B., & Suwarno, N. (2021). TEKNOLOGI DIGITAL MEMEDIASI DAMPAK STRATEGI BISNIS TERHADAP KINERJA UMKM DI NUSA TENGGARA BARAT. EKUITAS (Jurnal Ekonomi Dan Keuangan), 5(3). https://doi.org/10.24034/j25485024.y2021.v5.i3.4892
Ausat, A. M. A. (2025). In-Depth Study of the Strategic Interaction between Electronic Commerce, Innovation, and Attainment of Competitive Advantage in the Context of SMEs. International Journal of Analysis and Applications, 23. https://doi.org/10.28924/2291-8639-23-2025-78
Babalola, O. O., Amiolemen, S. O., Adegbite, S. A., & Ojo-Emmanuel, G. (2015). Evaluation of factors influencing technological innovations of small and medium enterprises in Nigerian Industrial Estates. International Journal of Innovation Science, 7(1), 39–53. https://doi.org/10.1260/1757-2223.7.1.39
Batubara, F. H. (2022). UTILIZATION OF DIGITAL TECHNOLOGY IN DEVELOPING MARKETING STRATEGIES FOR MSME PRODUCTS. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 6(3). https://doi.org/10.31955/mea.v6i3.2569
Božić, L., & Rajh, E. (2016). The factors constraining innovation performance of smes in Croatia. Economic Research-Ekonomska Istrazivanja, 29(1), 314–324. https://doi.org/10.1080/1331677X.2016.1168040
Chirico, F., Naldi, L., Hitt, M. A., Sieger, P., Sirmon, D. G., & Xu, K. (2024). Orchestrating resources with suppliers for product innovation. Journal of Product Innovation Management, 41(4), 735–767. https://doi.org/10.1111/jpim.12703
Citra Dewi, G., Bernardus, D., Sugiyono Agus Purwono, B., & Nova Yatna, C. (2023). POST-PANDEMIC MSME BUSINESS STRATEGY: DIGITAL MARKETING INNOVATION AND TRANSFORMATION. Jurnal Ekonomi, 12(01).
Han, Y.-C. (2011). Innovation:The way to enhance the core competitiveness of SMEs in the post-financial crisis era. BMEI 2011 - Proceedings 2011 International Conference on Business Management and Electronic Information, 1, 581–584. https://doi.org/10.1109/ICBMEI.2011.5917003
Hidayat, M. S., Sudarmiatin, S., & Mukhlis, I. (2022). Internationalization of UD Aida Furniture MSMEs in Pasuruan East Java Indonesia: Its Process and Development. JOURNAL OF ECONOMICS, FINANCE AND MANAGEMENT STUDIES, 05(12). https://doi.org/10.47191/jefms/v5-i12-24
Jiang, L., Li, B., & Zhang, M. (2025). The impact of digital transformation on the efficiency of corporate resource allocation: Internal mechanisms and external environment. Technological Forecasting and Social Change, 215. https://doi.org/10.1016/j.techfore.2025.124107
Jiang, W., & Li, J. (2024). Digital transformation and its effect on resource allocation efficiency and productivity in Chinese corporations. Technology in Society, 78. https://doi.org/10.1016/j.techsoc.2024.102638
Katiandagho, S., Kumenaung, A. G., & Rotinsulu, D. Ch. (2019). ANALISIS KONTRIBUSI SEKTOR PERIKANAN TERHADAP PDRB DAN PENYERAPAN TENAGA KERJA DI KOTA BITUNG. JURNAL PEMBANGUNAN EKONOMI DAN KEUANGAN DAERAH, 19(9). https://doi.org/10.35794/jpekd.23440.19.9.2019
Kawane, T., Adu-Gyamfi, B., Cao, Y., Zhang, Y., Yamazawa, N., He, Z., & Shaw, R. (2024). Digitization as an Adaptation and Resilience Measure for MSMEs amid the COVID-19 Pandemic in Japan: Lessons from the Food Service Industry for Collaborative Future Engagements. Sustainability (Switzerland), 16(4). https://doi.org/10.3390/su16041550
Korneeva, E., Hönigsberg, S., & Dinter, B. (2023). Leveraging Digital Platforms Through Business Model Innovation in SMEs: A Capability Perspective. 29th Annual Americas Conference on Information Systems, AMCIS 2023. https://www.scopus.com/inward/record.uri?eid=2-s2.0-85192884922&partnerID=40&md5=31a6e6661bce71c9eb69c7a61bc42e0a
Kurniawati, E., Idris, I., Handayati, P., & Osman, S. (2021). Digital transformation of MSMEs in Indonesia during the pandemic. Entrepreneurship and Sustainability Issues, 9(2). https://doi.org/10.9770/jesi.2021.9.2(21)
Langelo, L., Ngangi, C. R., & Rengkung, L. R. (2024). Agro Digitalization Capability Of The Umkm Sector In Bitung City In The Era Of Digital Agro Economy. Jurnal Agroekoteknologi Terapan, 5(1). https://doi.org/10.35791/jat.v5i1.53993
Leão, P., & da Silva, M. M. (2021). Impacts of digital transformation on firms’ competitive advantages: A systematic literature review. Strategic Change, 30(5), 421–441. https://doi.org/10.1002/jsc.2459
Lu, H., & Shaharudin, M. S. (2024). Role of digital transformation for sustainable competitive advantage of SMEs: a systematic literature review. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2419489
Martínez-Costa, M., Jiménez-Jiménez, D., & Dine Rabeh, H. A. (2019). The effect of organisational learning on interorganisational collaborations in innovation: an empirical study in SMEs. Knowledge Management Research and Practice, 17(2), 137–150. https://doi.org/10.1080/14778238.2018.1538601
NAWANGSARI, L. C., SISWANTI, I., & SOELTON, M. (2023). HUMAN RESOURCES MANAGEMENT STRATEGY FOR BUSINESS SUSTAINABILITY IN MSMES. ICCD, 5(1). https://doi.org/10.33068/iccd.v5i1.599
Octasylva, A. R. P., Yuliati, L. N., Hartoyo, H., & Soehadi, A. W. (2022). Innovativeness as the Key to MSMEs’ Performances. Sustainability (Switzerland), 14(11). https://doi.org/10.3390/su14116429
Putra, A. R., & Darmawan, D. (2022). Competitive Advantage of MSMEs in Terms of Technology Orientation and Entrepreneurship Competence. In ISSE International Journal of Service Science (Vol. 2, Issue 1).
Rahayuningsih, S. (2020). Animation media of animal husbandry thematic science learning to stimulate scientific attitude in early childhood. International Journal of Scientific and Technology Research, 9(2), 5879–5882. https://www.scopus.com/inward/record.uri?eid=2-s2.0-85079884518&partnerID=40&md5=46826c0bb9ce1f967f25d88a4afd1e95
Rokhman, M. T. N., Ratnawati, R., & Rahayu, Y. N. (2023). RELATIONSHIP BETWEEN HUMAN CAPITAL AND MSMES PERFORMANCE WITH COMPETITIVE ADVANTAGE AS A MEDIATION. Jurnal Aplikasi Manajemen, 21(1). https://doi.org/10.21776/ub.jam.2023.021.1.14
S. Syahyono, S. S. (2019). The Effect Of Structural Capital And Creative Innovation On Increasing Business Performance Of The Cibaduyut Shoes Fashion Industry In Bandung City. Fair Value: Jurnal Ilmiah Akuntansi Dan Keuangan, 1(2). https://doi.org/10.32670/fairvalue.v1i2.1192
Saputra, M. H., Utomo, M. N., Ariansyah, K., Wismayanti, Y. F., & Ansyah, R. H. A. (2024). Small and medium-sized enterprises dynamic capabilities and competitive advantage: The mediating effect of digitalization. Entrepreneurial Business and Economics Review, 12(3), 41–67. https://doi.org/10.15678/EBER.2024.120303
Sultan, A., Bhat, A., & Gautam, K. (2021). Collaboration Competency as a Driver for Improving Performance of Small-Medium Enterprises in Resource Constraint Economies: An Exploratory Study. SCMS Journal of Indian Management, 18(4), 57–67. https://www.scopus.com/inward/record.uri?eid=2-s2.0-85126565735&partnerID=40&md5=8af93cc84121ff10728765dbadfe49de
Susanti, E., Mulyanti, R. Y., & Wati, L. N. (2023). MSMEs performance and competitive advantage: Evidence from women’s MSMEs in Indonesia. Cogent Business and Management, 10(2). https://doi.org/10.1080/23311975.2023.2239423
Syukron, S., Zarkasih, A., Nasution, S. L., Siregar, M. R., & Munthe, R. S. (2022). Strategi Pemasaran Produk Di Era Digital Pada UMKM. COMSEP: Jurnal Pengabdian Kepada Masyarakat, 3(2). https://doi.org/10.54951/comsep.v3i2.282
Taiwo Agwu, J. N., Mercy, A., & Evawere, A. (2016). The role of ICTS in the improvement of the competitiveness of SMEs. Asian Journal of Information Technology, 15(18), 3414–3421. https://doi.org/10.3923/ajit.2016.3414.3421
Toha, M., & Habibah, N. J. (2023). MSME EMPOWERMENT AND DEVELOPMENT PROGRAM TO INCREASE CONSUMER SATISFACTION. Sahwahita: Community Engagement Journal, 1(1).
Traboulsy, O. R. (2023). The Role of Resource Acquisition in Achieving Sustainable Competitive Performance for SMEs in an Emerging Market: A Moderated Mediation Analysis. Sustainability (Switzerland), 15(16). https://doi.org/10.3390/su151612302
Van Auken, H., Madrid-Guijarro, A., & García-Pérez-de-Lema, D. (2008). Innovation and performance in Spanish manufacturing SMEs. International Journal of Entrepreneurship and Innovation Management, 8(1), 36–56. https://doi.org/10.1504/IJEIM.2008.018611
Wehantouw, G. J. M., Porajouw, O. . , & Taroreh, M. L. G. (2021). PERANAN SEKTOR PERTANIAN TERHADAP PEREKONOMIAN DI KOTA BITUNG. AGRI-SOSIOEKONOMI, 17(2). https://doi.org/10.35791/agrsosek.17.2.2021.33778
Woschke, T., Haase, H., & Kratzer, J. (2017). Resource scarcity in SMEs: effects on incremental and radical innovations. Management Research Review, 40(2), 195–217. https://doi.org/10.1108/MRR-10-2015-0239
Wulandari, R., & Koe, W.-L. (2022). The Factors that Influence the Intention of Marketing and Technological Innovation in MSMEs. Marketing and Management of Innovations, 13(4). https://doi.org/10.21272/mmi.2022.4-12
Xuan, T. G., Yanova, O., & Khaliev, M. (2024). Digital business transformation: impact of IT solutions on business processes and ecology. BIO Web of Conferences, 138. https://doi.org/10.1051/bioconf/202413803015
Yaskun, M., Sudarmiatin, Hermawan, A., & Rahayu, W. P. (2023). THE EFFECT OF MARKET ORIENTATION, ENTREPRENEURIAL ORIENTATION, INNOVATION AND COMPETITIVE ADVANTAGE ON BUSINESS PERFORMANCE OF INDONESIAN MSMEs. International Journal of Professional Business Review, 8(4). https://doi.org/10.26668/businessreview/2023.v8i4.1563
Zhang, C., & Deng, Y. (2024). How does digital transformation affect firm technical efficiency? Evidence from China. Finance Research Letters, 69. https://doi.org/10.1016/j.frl.2024.106069
Zhang, J., & Chen, Z. (2024). Exploring Human Resource Management Digital Transformation in the Digital Age. Journal of the Knowledge Economy, 15(1). https://doi.org/10.1007/s13132-023-01214-y
Zhou, Y., Lyu, J., & Li, L. (2025). Can digital transformation enhance labor productivity in enterprises: An analysis from the perspective of business process reengineering. PLOS ONE, 20(6 JUNE). https://doi.org/10.1371/journal.pone.0325484