Driving Sustainable Innovation through Digital Transformation: A Behavioural Model of the Upcycling Craft Industry in Indonesia

Background Digital transformation has emerged as a key driver of competitiveness across industries, yet its adoption in the upcycling craft sector remains insufficiently explored. Existing studies often focus on large enterprises, leaving a research gap in understanding how micro-scale, resource-constrained upcycling businesses integrate digital technologies, specifically within the Indonesian upcycling craft sector context. This study addresses this gap by developing the Behavioral-Based Digital Transformation (BBDT) model to investigate behavioral determinants of digital adoption, implementation, and innovation outcomes in Indonesia’s sustainability-oriented creative sector. Method This study employed a sequential exploratory mixed-methods approach. The qualitative phase involved field observations and in-depth interviews with three upcycling craft enterprises, while the quantitative phase surveyed 30 micro-scale upcycling businesses across multiple Indonesian regions. Data were analyzed using thematic coding, NVivo software, and Partial Least Squares Structural Equation Modeling (PLS-SEM) to test the proposed Behavioral-Based Digital Transformation (BBDT) model. Results and Conclusion Findings indicate that internal and external factors, including leadership commitment, financial capability, and market demand, significantly shape behavioral orientation toward digital adoption. Behavioral intentions, in turn, drive digital technology implementation, enhancing operational efficiency, material optimization, and product innovation. Digital adoption acts as both an outcome and enabler of early-stage sustainable transformation pathways, sustainable transformation, with innovation reinforcing initial cycles of engagement with technology. The study provides preliminary support for the mediating role of behavioral intention and underscores the critical importance of human and organizational readiness. These insights offer theoretical contributions to TAM, TPB, and IDT integration and practical guidance for policymakers, creative communities, and micro-enterprise owners.