Social Cognitive Theory and Digital Transformation for Sustainable Competitiveness in Indonesian MSMEs

Micro, Small, and Medium Enterprises (MSMEs) are vital to Indonesia’s economy, yet their global competitiveness remains limited. In the digital era, developing digital capabilities, digital absorptive capacity, and digital leadership is critical for achieving sustainable competitive advantage. This study examines the relationships among these constructs in Indonesian manufacturing MSMEs, drawing on Social Cognitive Theory to explain how social learning and leadership drive digital adoption. A quantitative approach was employed through a survey of 285 MSME owners and managers, with data analyzed using Structural Equation Modeling–Partial Least Squares. The results show that digital capabilities do not directly improve sustainable competitive advantage but significantly enhance digital absorptive capacity, which in turn strongly drives competitiveness. Digital leadership also fosters both digital capabilities and absorptive capacity, though its effect on competitive advantage occurs indirectly. These findings highlight the mediating role of digital absorptive capacity in linking resources and leadership to long-term competitiveness. The study contributes by extending Social Cognitive Theory to the MSME context in emerging markets and provides practical insights for strengthening digital knowledge assimilation and leadership development to sustain competitiveness in dynamic environments