Digital Marketing Strategy on Firm Performance: The Mediating Role of Innovation

Abstract

Digital transformation has profoundly reshaped the marketing landscape, compelling small and medium-sized enterprises (SMEs) to adopt digital marketing strategies to enhance business performance. This study aims to examine the impact of digital marketing strategies on firm performance, with innovation positioned as a mediating variable. Grounded in the Resource-Based View (RBV) theory, which posits that competitive advantage and superior performance are achieved through the strategic deployment of unique internal resources—such as innovative capabilities and digital technology utilization—this research employs a quantitative approach using Partial Least Squares Structural Equation Modeling (PLS-SEM). Data were collected through an online survey involving 127 SME actors in Indonesia. The analysis reveals that digital marketing has a positive effect on both firm performance and innovation. Moreover, innovation significantly influences firm performance and mediates the relationship between digital marketing and performance. These findings reinforce theoretical insights into the importance of integrating digital strategies with innovation capabilities and offer practical implications for SMEs in designing innovative and sustainable marketing strategies in the digital era.