Abstract
Abstract Small-scale fisheries operating in semi-enclosed coastal systems increasingly face chronic environmental pressures, particularly sedimentation, which may alter ecological conditions and constrain adaptive responses. This study examines how perceived sedimentation impacts and livelihood diversification are associated with fisheries business performance and fishermen capacity in Kendari Bay, Indonesia. Using a cross-sectional explanatory design, data were collected in 2025 from 200 small-scale fishing households and analyzed using reflective full Structural Equation Modeling–Partial Least Squares (SEM-PLS). All constructs were measured using perception-based indicators, and the analysis was conducted within a variance-based modeling framework. The results indicate that perceived sedimentation impact has a direct and significant association with fishermen capacity, while its relationship with fisheries business performance is not statistically significant. Livelihood diversification is positively and significantly associated with fisheries business performance but does not show a direct association with fishermen capacity. Furthermore, fisheries business performance does not mediate the relationship between sedimentation impact or diversification and fishermen capacity. These findings suggest that under chronic environmental stress, fishermen capacity conceptualized as a multidimensional socio-ecological capability encompassing financial management, adaptive decision-making, and institutional networking is not necessarily reflected through short-term economic performance within the observed data context. The model explains 26.4% of the variance in business performance and 7.8% of the variance in fishermen capacity, indicating limited explanatory power, particularly for the primary outcome variable. Rather than positioning economic and non-economic dimensions as competing forces, the findings indicate that economic performance represents only one component within a broader adaptive capacity structure. However, these interpretations should be understood as context-specific empirical associations rather than generalizable causal mechanisms. The study contributes contextual empirical evidence on capacity formation in sediment-affected semi-enclosed coastal systems and highlights the importance of integrating environmental management and capacity-building policies in small-scale fisheries.