Identifying the impact of absorptive capacity, new product development, and marketing capabilities on digital marketing adoption and new product performance in Indonesian SMEs

This study investigates the impact of absorptive capacity on enhancing the performance of SMEs through new product development, marketing capabilities, and the adoption of digital marketing. The research problem addresses how absorptive capacity influences these factors to improve new product performance. A quantitative approach was employed, collecting data from 212 SMEs in three cities in East Java Province, Indonesia. Data analysis was conducted using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that critical factors influencing new product performance include the ability of SMEs to absorb external knowledge (indicator AC3, loading factor 0.852), new initiatives in product development (indicator NPD4, loading factor 0.886), and strong marketing strategies (indicator MC3, loading factor 0.878). Further analysis reveals that absorptive capacity positively and significantly affects new product development (ß=0.763; p-value<0.05) and marketing capabilities (ß=0.724; p-value <0.05) but has a negative and insignificant effect on digital marketing adoption (ß=–0.102; p-value>0.05). However, digital marketing adoption positively and significantly impacts new product performance (ß=0.628; p-value<0.05). These findings suggest that while absorptive capacity is crucial for new product development and marketing capabilities, it is insufficient to drive digital marketing adoption. The results highlight the important but not significant mediating role of digital marketing adoption. The practical implications provide guidance for SMEs to adjust their marketing strategies and new product development to improve performance, particularly during a crisis