Strategic Distribution, Digital Marketing, and Open Innovation: Toward Integrated Capability Development for SME Performance

This study examines the impact of Distribution Strategy on SME performance, with Digital Marketing and Open Innovation as mediating variables. Using Partial Least Squares Structural Equation Modeling (PLS-SEM), data were analyzed from 250 SMEs in Makassar, Indonesia. The results show that Distribution Strategy positively affects performance, both directly and indirectly through Open Innovation. However, Digital Marketing does not serve as a significant mediator, indicating that its use among SMEs may still be limited to tactical functions. Open Innovation emerges as the strongest contributor, highlighting its role in converting distribution capabilities into performance gains. The study enriches Resource Advantage (R-A) Theory by demonstrating how distribution acts as a dynamic capability when combined with external innovation. Practical implications are offered for SME leaders to align distribution, digital, and innovation strategies-especially in digitally transitioning regions where infrastructure is uneven but evolving.