Dynamic Capabilities and Performance of Indonesian Women Entrepreneurs: The Mediating Roles of Innovation and Digital Transformation

Abstract

The success of women entrepreneurs in the current rapidly evolving business landscape increasingly depends on the group’s ability to develop dynamic capabilities, particularly the capacities to sense, seize, and reconfigure opportunities, which enable innovation and digital transformation. Accordingly, this study aims to examine the relationship between dynamic capabilities and the performance of women entrepreneurs, both directly and indirectly, through the mediating roles of innovation and digital transformation. The study was conducted in East Java Province, Indonesia, between June and August 2025 and included 570 women entrepreneurs operating in the service, trade, and manufacturing sectors. Data were collected through questionnaires, and the analysis adopted Partial Least Squares Structural Equation Modeling (PLS-SEM) using SmartPLS software to assess the structural relationships among the proposed constructs. The obtained results showed that dynamic capabilities did not have a significant direct effect on the performance of women entrepreneurs. However, the factor reflected a significant indirect relationship with performance through innovation and digital transformation. In the service sector, digital transformation was the stronger mediating variable, while in the trade and manufacturing sectors, innovation showed a stronger association with entrepreneurial performance. These findings contribute to theory and practice by providing insights for women entrepreneurs on how to strengthen their respective strategic approaches and by offering guidance to policymakers in designing supportive interventions that promote innovation and digital transformation.