Digital Platforms as Enablers of MSMEs' Business Model Innovation: Revealing the Role of Capability Reconfigurations

Abstract

This study aims to examine the impact of digital platforms on business model innovation within the MSME sector in Indonesia, addressing the contextual limitations found in previous study. Utilizing a comprehensive study design, this study investigates the roles of digital platform adoption, evolutionary capability reconfiguration, and substitutional capability reconfiguration in driving business model innovation. The study methods included hypothesis testing through partial least square structural equation modeling (PLS-SEM) on data collected from MSMEs in Sleman, Yogyakarta. The results reveal that while digital platform adoption alone does not directly enhance business model innovation, it significantly influences capability reconfiguration. Specifically, substitutional reconfiguration plays a critical role in transforming business models by integrating new, more efficient capabilities. Conversely, evolutionary reconfiguration, despite being influenced by digital platforms, does not have an immediate significant impact on business model innovation. These findings contribute to the theoretical understanding of dynamic capabilities, highlighting the importance of substitutional reconfiguration for rapid and significant innovation. Practically, the study provides valuable insights for MSME owners and managers on leveraging digital platforms to enhance their value chains and drive business model innovation, ensuring sustainability and competitive advantage in the digital age.