The Effect of Competitive Strategy and Strategic Capabilities on the Financial Performance of MSMEs in Surakarta City from the Perspective of Strategic Management Accounting

Abstract

This study aims to analyze the effect of competitive strategy and strategic capabilities on the financial performance of Micro, Small, and Medium Enterprises (MSMEs) in Surakarta City, with Strategic Management Accounting (SMA) as a moderating variable. Competitive strategy in this study consists of cost leadership, differentiation, and focus strategy, while strategic capabilities include market orientation, innovation capability, and digital financial capability. This study employs a quantitative approach, with MSMEs in Surakarta City as the unit of analysis. The respondents are business owners, managers, or individuals who have an adequate understanding of business strategy and performance. Primary data are collected through questionnaires and analyzed using Partial Least Squares–Structural Equation Modeling (PLS-SEM). This study examines the effect of each dimension of competitive strategy and strategic capabilities on the financial performance of MSMEs and investigates the moderating role of Strategic Management Accounting in these relationships. From the Resource-Based View (RBV) perspective, competitive strategy and strategic capabilities are considered internal capabilities that can support the creation of competitive advantage, while Strategic Management Accounting provides strategic information to support business decision-making. This study is expected to contribute theoretically to the development of strategic management accounting literature and provide practical implications for MSME owners in formulating appropriate strategies, strengthening internal capabilities, and utilizing strategic information to improve financial performance.