Internal Capabilities for Enhancing Marketing Performance in Batik SMEs: The Mediating Role of Product Innovation and the Contributions of Digital Competence and Employee Engagement

Abstract

This study aims to analyze the influence of digital competence and employee engagement on marketing performance through product innovation in batik MSMEs in the city of Surakarta. The research uses a quantitative approach with an explanatory research design. The research population consisted of 452 batik MSMEs registered with the Surakarta City Cooperatives, Small and Medium Enterprises Office, with a sample of 150 respondents selected using purposive sampling techniques. Data was collected through a questionnaire and analyzed using Structural Equation Modeling based on Partial Least Squares (SEM-PLS) with the help of SmartPLS 3. The results of the study show that digital competence has a positive and significant effect on product innovation and marketing performance. Employee engagement has a positive and significant effect on product innovation, but it does not have a direct effect on marketing performance. Product innovation has been proven to have a positive and significant effect on marketing performance. Mediation effect testing shows that product innovation does not mediate the influence of digital competence on marketing performance, but mediates the influence of employee engagement on marketing performance. These findings suggest that both internal capabilities have different mechanisms for improving marketing performance. Digital competence has a direct influence on marketing performance, while employee engagement requires product innovation as a connecting mechanism. This research contributes to the development of internal capability studies in MSMEs as well as being the basis for batik MSME actors in formulating strategies to increase competitiveness through strengthening digital competence, human resource involvement, and product innovation.

Keywords: Digital Competence, Employee Engagement, Product Innovation, Marketing Performance, Batik MSMEs.