Abstract
Internal firm capabilities are increasingly viewed as central to MSME competitiveness, yet their interplay with digital adoption remains underexplored, particularly in non-metropolitan regional economies. This study examines the impact of strategic competence and operational competence on the business performance of MSMEs through digital transformation and social media utilization in Jambi Province, Indonesia. A quantitative survey was conducted with 250 MSME owners across Jambi City, Bungo Regency, and Sungai Penuh City, selected through stratified random sampling, with data analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results show that strategic competence, operational competence, digital transformation, and social media utilization each have positive and significant effects on business performance. Both competencies also significantly enhance digital transformation and social media utilization, which in turn significantly mediate the relationships between competencies and performance. These findings indicate that internal competencies generate greater performance gains when accompanied by effective digital adoption and active social media use, extending the Knowledge-Based View and Absorptive Capacity Theory to the MSME context while offering practical guidance for strengthening competitiveness in the digital economy.