Driving Digital Innovation: The Role of Entrepreneurial Traits and Capabilities in Gender-Based Small Medium Entreprises

Abstract Despite the growing significance of digital innovation, research on its determinants and effects on SMEs, especially those led by women, is limited. This study examined the role of digital innovation in mediating the impact of entrepreneurial characteristics, digital orientation, and digital capabilities on the competitive advantage of SMEs managed by males and females. The research sample comprised 325 SME owners and managers in Indonesia. This study employed a structural equation model and multi-group sample testing to evaluate the hypothesis. The determinants of digital innovation in SMEs managed by males are entrepreneurial characteristics, digital orientation, and capability. Digital capabilities are distinct from those of SMEs managed by females. Digital orientation does not directly affect competitive advantage but has an indirect effect on digital innovation. The different test results for the digital capabilities of males and females indicate that there is a gender gap in digital technology. This study corroborates the resource-based view (RBV) and expands the RBV Theory in the realm of digital innovation by empirically identifying the factors that drive digital innovation, which enhances the competitive advantage of SMEs. Thus, the government needs to conduct a digital literacy program and accept a technology pact to encourage more female students in science, technology, engineering, and mathematics (STEM) to narrow the gender gap in digital literacy. Research examining different models of digital innovation and competitive advantage to prove the gender gap between females and males in the use of digital technology has not yet been conducted.