HUMAN CAPITAL AND DIGITAL MARKETING STRATEGY IN DRIVING SME COMPETITIVE ADVANTAGE

Evidence From The Embroidery Industry In Tasikmalaya, West Java, Indonesia

Abstract

Tasikmalaya's embroidery (bordir) industry represents one of Indonesia's most culturally distinctive and economically significant craft-based MSME clusters, generating an estimated IDR 2.3 trillion in annual turnover across more than 4,200 registered embroidery enterprises and employing over 72,000 artisans. Yet the industry faces mounting competitive pressure from low-cost mass-produced alternatives, digital market disruption, and the challenge of attracting and retaining digitally skilled human capital. This  research examines how human capital development and digital marketing strategy independently and jointly drive competitive advantage, with innovation capability serving as a mediating mechanism. Drawing on the Resource-Based View (Barney, 1991), Dynamic Capabilities Theory (Teece et al., 1997), and the Knowledge-Based View (Grant, 1996), a conceptual model is developed and empirically tested using Partial Least Squares Structural Equation Modeling (PLS-SEM) on a stratified random sample of 287 embroidery MSME owner-managers and employees in Tasikmalaya Regency and City. Results confirm that human capital (β = 0.334, p < 0.001) and digital marketing strategy (β = 0.361, p < 0.001) both exert significant positive direct effects on competitive advantage, with digital marketing demonstrating the stronger direct effect. Innovation capability is established as the strongest single predictor of competitive advantage (β = 0.412, p < 0.001) and partially mediates both the human capital– competitive advantage relationship (indirect β = 0.180, CI [0.112, 0.251]) and the digital marketing– competitive advantage relationship (indirect β = 0.162, CI [0.098, 0.228]). The model explains 60.4% of variance in competitive advantage (R² = 0.604). MSMEs with high levels of both human capital and digital marketing capability demonstrate 28.7% average revenue growth and 31.4% export market reach   far exceeding industry benchmarks. The  research proposes a Human Capital–Digital Innovation– Competitive Advantage (HDICA) framework and provides actionable recommendations for MSME practitioners, regional government development agencies, and craft industry policymakers