Bridging Digital Transformation and Business Performance: The Mediating Roles of Strategic Absorptive Capacity and Supply Chain Management in SMEs in West Java, Indonesia

This study investigates the relationship between digital transformation and business performance in small and medium-sized enterprises (SMEs) in West Java, Indonesia, by examining the mediating roles of strategic absorptive capacity and supply chain management. Using a quantitative approach, data were collected from 696 owners and managers of SMEs in the food and beverage sector. Structural Equation Modeling (SEM) using AMOS 24 was employed to test the hypotheses and model fit. The findings demonstrate that digital transformation significantly enhances strategic absorptive capacity, which in turn has a strong influence on both supply chain efficiency and business performance. Additionally, leadership style—particularly transformational and servant leadership—positively affects supply chain management, although it does not directly influence absorptive capacity. The results further indicate that supply chain management and absorptive capacity are significant predictors of business performance. This research contributes to the understanding of how internal capabilities, such as leadership and knowledge absorption, interact with digital initiatives to enhance competitiveness in emerging markets. It provides practical insights for SME practitioners and policymakers on the importance of aligning digital strategies with leadership development and knowledge management