The Impact of E-Commerce Adoption and Digital Capability on MSME Business Sustainability: The Mediating Role of Business Innovation

Abstract

Micro, Small, and Medium Enterprises (MSMEs) play a strategic role in supporting national economic growth, job creation, and community welfare. E-commerce adoption and digital capability have become important factors in enhancing MSMEs’ competitiveness, while business innovation plays a crucial role in creating added value and supporting long-term business sustainability. This study aims to analyze the influence of e-commerce adoption and digital capability on MSME business sustainability through business innovation as an intervening variable.This study employed a quantitative approach using a survey method. Data were collected through questionnaires based on a five-point Likert scale distributed to 150 food and beverage MSME owners in the Greater Jakarta area (Jabodetabek) who had utilized digital platforms in their business activities. The sampling technique used was purposive sampling. Data were analyzed using Structural Equation Modeling–Partial Least Squares (SEM-PLS) with SmartPLS 4 software. The results indicate that e-commerce adoption has a positive and significant effect on business innovation (β = 0.382; p < 0.001), while digital capability has a positive and significant effect on business innovation (β = 0.471; p < 0.001). E-commerce adoption (β = 0.214; p = 0.004) and digital capability (β = 0.269; p = 0.001) also have positive and significant effects on MSME business sustainability. Furthermore, business innovation has a positive and significant effect on MSME business sustainability (β = 0.487; p < 0.001). Business innovation acts as a significant mediator, while the research model explains 68.7% of the variance in business innovation and 76.4% of the variance in MSME business sustainability.