Creating Social Value in SMEs: Unpacking The Roles of Digital Innovation, Community Engagement and Local Economic Empowerment

Abstract

Micro, small, and medium-sized enterprises (MSMEs) in Batam have increasingly adopted digital platforms, social media, digital payment systems, and online services. However, these technological advancements have not always been accompanied by stronger community engagement or improvements in local economic outcomes. This study examined the effects of digital innovation and community engagement on social value creation, with local economic empowerment serving as a mediating variable. A quantitative explanatory survey was conducted among 200 culinary MSME owners selected through purposive sampling. Data were collected using a five-point Likert scale questionnaire and analyzed using partial least squares structural equation modeling (PLS-SEM) with SmartPLS software. The findings indicated that digital innovation and community engagement had positive and statistically significant effects on both local economic empowerment and social value creation. Local economic empowerment also had a positive and statistically significant effect on social value creation and mediated the relationships between digital innovation, community engagement, and social value creation. Theoretically, these findings contributed to integrating dynamic capabilities theory, social capital theory, and stakeholder theory by highlighting the mediating role of local economic empowerment. From a practical perspective, the findings emphasized the importance of strengthening digital capabilities, collaborative networks, business development initiatives, and community-oriented programs among MSMEs, business associations, and local governments to promote broader and more sustainable social benefits.