Are We Investing in the Right Capabilities? Unpacking the Drivers of SME Competitiveness in Surabaya

Abstract

Background: Small and Medium Enterprises (SMEs) play a vital role in Indonesia's economy, particularly in East Java, where they contribute 58.35% to regional economic performance. In Surabaya, a major metropolitan center, SMEs face increasing competition, evolving consumer preferences, and technological disruption. Despite their significance, many SMEs struggle with limited digital literacy, low innovation capacity, and suboptimal human resource management, which hinders their competitiveness in dynamic markets.
Purpose: This study aims to analyze the influence of strategic agility, organizational innovation, human resource management, and digital platform capability on competitiveness within Surabaya's F&B sector.
Design/methodology/approach: A quantitative approach was employed using multiple linear regression analysis in SPSS. The sample consisted of 160 SME owners or managers in Surabaya selected through purposive sampling, with criteria including an annual turnover exceeding IDR 2 billion (based on Law No. 20 of 2008) and active use of digital platforms. Data was collected using structured questionnaires with five-point Likert scales measuring strategic agility (eight indicators), organizational innovation (six indicators), human resource management (seven indicators), digital platform capability (five indicators), and SME competitiveness (six indicators).
Findings/Results: The results reveal that all independent variables have positive and significant effects on SME competitiveness. Digital platform capability exhibits the strongest influence, followed by human resource management, organizational innovation, and strategic agility. The model explains 72.5% of the variance in SME competitiveness, with all classical assumption tests satisfied.
Conclusion: Strategic agility, organizational innovation, human resource management, and digital platform capabilities are critical drivers of SME competitiveness in Surabaya. The findings underscore that SMEs must enhance their responsiveness to market changes, foster continuous innovation, develop employee competencies through structured HR practices, and optimize digital platform utilization to strengthen their competitive positions.
Originality/value (State of the art): Integrating four strategic capabilities into a comprehensive framework explaining SME competitiveness in urban Indonesia contributes to the Resource-Based View (RBV) theory. This helps SME managers prioritize digital capability development and strategic HR practices and provides policymakers with evidence-based advice for designing targeted interventions to boost metropolitan SME competitiveness.

Keywords: digital platform capability, human resource management, organizational innovation, SME competitiveness, strategic agility