From heritage to high-tech: Digital strategies for sustainable growth in Indonesian batik SMEs

The batik industry, a cornerstone of Indonesia’s cultural heritage and economic vitality, faces mounting pressure to modernize amid digital disruption. Despite their importance, batik small and medium-sized enterprises (SMEs) often struggle to translate digital strategies into tangible business gains. Addressing this gap, this study investigates how digital marketing capabilities affect batik SMEs’ business performance, with a focus on the mediating role of ambidextrous innovation (exploratory and exploitative) and market capitalization agility. Survey data from 223 batik SMEs in East Java were analyzed using a Structural Equation Modeling (SEM) for hypothesis testing. Findings reveal that digital marketing capabilities significantly enhance exploitative innovation and market capitalization agility, which together sequentially drive improved business performance. However, direct effects of digital marketing on business performance were not observed. The results advance Strategic Fit and Dynamic Capabilities theories by integrating digital marketing, innovation, and agility into a unified framework. For practitioners, the study underscores the need for batik SMEs to balance innovation and agility when adopting digital marketing strategies, refine product development, and adapt to market shifts. These insights provide a roadmap for sustaining traditional industries in the digital era and open new avenues for research on digital transformation in heritage sectors.