The Effect of Digital Capability and Digital Marketing Capability on Firm Performance in Samarinda, Indonesia: The Mediating Role of Digital Innovation

The rapid advancement of digital technologies has transformed business operations and intensified competition, requiring firms to develop digital capabilities to remain competitive. This study aims to analyze the effect of digital capability and digital marketing capability on firm performance, with digital innovation as a mediating variable, in the context of Daya Motor Samarinda, Indonesia. A quantitative, explanatory design was employed, using data collected from 152 respondents via a structured questionnaire. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that digital capability has a significant positive effect on digital innovation but does not directly influence firm performance. Digital marketing capability, on the other hand, has a significant positive effect on both digital innovation and firm performance, demonstrating its strategic role in enhancing organizational outcomes. Furthermore, digital innovation does not have a significant effect on firm performance and fails to mediate the relationships between digital capability, digital marketing capability, and firm performance. These findings suggest that while digital capabilities are important for fostering innovation, their impact on performance depends on effective implementation and alignment with business strategies. The study concludes that digital marketing capability plays a more immediate role in improving firm performance, while digital innovation has not yet been fully optimized to generate measurable outcomes. These results contribute to the literature on digital transformation and provide practical insights for organizations seeking to enhance performance through digital strategies.