From Digital Capability to Entrepreneurial Resilience: The Mediating Role of Business Model Innovation among Indonesian MSMEs

Abstract

Substantial supply chain disruptions and volatile market shifts necessitate that Micro, Small, and Medium Enterprises (MSMEs) cultivate robust entrepreneurial resilience. This study investigates the relationship between digital capabilities and entrepreneurial resilience, examining the mediating role of business model innovation. Employing an explanatory survey, empirical data were collected from 230 MSME founders and managing directors in the creative manufacturing and trade sectors across Indonesia. Data were evaluated via Partial Least Squares Structural Equation Modeling (PLS-SEM) in SmartPLS 4.0. Empirical results indicate that: (1) digital capability positively and significantly impacts business model innovation (β = 0.548; p < 0.001) and entrepreneurial resilience (β = 0.242; p < 0.001); (2) business model innovation substantially fosters entrepreneurial resilience (β = 0.465; p < 0.001); and (3) business model innovation significantly mediates the link between digital capability and entrepreneurial resilience (indirect effect β = 0.255; p < 0.001; 95% CI [0.198; 0.324]). The framework accounts for 55.4% of the variance in business model innovation and 63.8% in entrepreneurial resilience (R² = 0.638). These findings demonstrate that digital capability serves as an indispensable technological enabler that strengthens entrepreneurial resilience when operationalized through adaptive business model redesign.