Effect of Digitalization on Business Performance in the MSME Industry Context

Abstract

The current digital era is increasingly developing in the use of new technology that creates value for companies and offers benefits. Digitalization is useful for increasing competitive advantage to improve business performance. The purpose of this study is to find out whether digitalization affects business performance and to find out whether competitive advantage can mediate digitalization on business performance. The sample of this research is 115 SMEs in Semarang. data were analyzed using the SEM approach with the smartPLS tool. The results of the study show that the digitalization variable has an influence on business performance, furthermore, competitive advantage also has a positive and significant effect on business performance. The results of the indirect effect test also show that competitive advantage can mediate the relationship between digitalization and business performance. The better the implementation of digitalization, the higher the competitive advantage MSMEs, consequently leading to an increase the business performance.