Purpose: This study examines digital marketing capabilities, Customer Relationship Management (CRM), and innovation orientation in relation to SME competitive advantage in Medan, Indonesia, with market responsiveness as a proposed mediator.
Research Methodology: A cross-sectional survey collected 243 valid responses from SME owners and managers between July and September 2024 using purposive sampling. Covariance-based structural equation modeling in AMOS 26.0 used maximum likelihood estimation and 5,000 bootstrap resamples.
Results: Digital marketing capabilities and innovation orientation showed significant positive direct and indirect relationships with competitive advantage. CRM had a significant indirect relationship through market responsiveness, whereas its direct relationship was not significant. Indirect estimates were 0.104, 0.081, and 0.120, respectively. Innovation orientation had the largest total point estimate, although differences between effects were not tested.
Conclusions: The findings are consistent with market responsiveness connecting strategic capabilities to competitive advantage. CRM’s nonsignificant direct path does not establish that its contribution operates exclusively through this mediator.
Limitations: The single-city, cross-sectional design and self-reported measures restrict causal inference and generalizability.
Contributions: The study connects contemporary resource-based value-creation theory with dynamic-capabilities research, examining market responsiveness as a specific pathway between digital, relational, and innovation capabilities and perceived competitive advantage in an Indonesian SME setting.