Innovation Aesthetics as a Key Driver of Sustainable Competitive Advantage: A Multi-Level Analysis

Rapid changes in the business environment and rising consumer expectations require small and medium enterprises to continuously innovate in order to remain competitive. This study aims to examine the effect of innovation in supporting economic growth and sustainability among small and medium enterprises in Indonesia. The study employed a quantitative survey approach, with data collected through structured questionnaires distributed online using Google Forms, offline, and through direct visits. The sample consisted of 524 respondents, including business owners, store heads, division heads, and managers. The findings indicate that entrepreneurial orientation enhances innovation aesthetic capability, while strategic entrepreneurship weakens the relationship between entrepreneurial orientation and innovation adoption, as well as between knowledge transformation and innovation adoption. Furthermore, innovation adoption significantly improves sustainable competitive advantage. These results demonstrate that firms cannot survive without continuous innovation due to dynamic market conditions and increasingly diverse consumer needs. In conclusion, continuous innovation is essential for the long-term sustainability of small and medium enterprises. This study applies the Stimulus Organism Response theory and contributes to the Resource-Based View by positioning innovation aesthetic as a valuable, rare, and difficult-to-imitate strategic resource that strengthens sustainable competitive advantage.