The effects of knowledge-oriented leadership style, digital transformation, and human resource development on sustainable competitive advantage in East Java MSMEs

Abstract

This study investigates the implications of KOLS, Digital Transformation, and Human Resource Development for Sustainable Competitive Advantage through Innovative Behavior and Organizational Innovation in East Java Micro, Small, and Medium Enterprises (MSMEs). 382 MSMEs in East Java were surveyed, and their data were analyzed using Structural Equation Modeling (SEM). The results showed that KOLS, Digital Transformation, and Human Resource Development significantly positively affected Innovative Behavior, Organizational Innovation, and Sustainable Competitive Advantage. Moreover, Innovative Behavior and Organizational Innovation are important mediating roles in this relationship. The results highlight the importance of cultivating a culture of sharing knowledge, embracing digital transformation, and investing in employee development to increase the competitive advantage of MSMEs. This study provides practical implications for MSME management, emphasizing the need to develop strategies that promote knowledge-oriented leadership, adopt digital technologies, and enhance employee skills and competencies. Thus, MSMEs can foster a culture of innovation, which leads to a sustainable competitive advantage in the long term. This research contributes to understanding the factors driving Sustainable Competitive Advantage in East Java MSMEs. It offers valuable insights for practitioners and policymakers in driving the growth and competitiveness of the MSME sector.