Sustainable SMEs Performance: Knowledge Management, Human Resources Digital Transformation, and Innovation Capabilities – A Practical Approach to Business in the Digital Age

The purpose of this study is to examine the influence of knowledge management (KM), and human resources digital transformation (HRDT) on sustainable performance through innovation capabilities (IC) mediators among small and medium-sized enterprises (SMEs). The explanatory survey method was developed with a questionnaire as an instrument to collect data from 353 respondents selected as employees and SMEs in Indonesia. Theoretical confirmation to test hypotheses in causality predictive models by applying structural equation modeling, covariance-based (CB-SEM) with AMOS v.24 application. The findings of the study show that KM, HDRT and IC are proven to have a positive and significant direct effect on the performance of sustainable SMEs. KM and HDRT also had a positive and significant effect on the improvement of ICs. The confir-mation provides sufficient evidence that verified ICs have a positive mediating effect on the relationship between KM and HRDT with sustainable SME performance. IC is stra-tegically a critical solution in strengthening the implementation of KM and HRDT as an effective and adaptive SME managerial tool for sustainable performance improvement. These findings provide enough valuable evidence that can fill the existing gaps related to sustainable SME performance models.