The Effect Of Artificial Intelligence Adoption And Digital Marketing Capability On MSME Business Performance: The Mediating Role Of Customer Engagement In Tangerang City

Muhammad Syahputra; Pambuko Naryoto

Muhammad Syahputra Department of Management, Faculty of Economics and Business, Budi Luhur University, Jakarta, Indonesia
Pambuko Naryoto Department of Management, Faculty of Economics and Business, Budi Luhur University, Jakarta, Indonesia

Keywords: Artificial Intelligence, Digital Marketing Capability, Customer Engagement, Business Performance, MSMEs

Abstract

The rapid development of digital technologies and Artificial Intelligence (AI) has created new opportunities for Micro, Small, and Medium Enterprises (MSMEs) to improve competitiveness and business performance. This study aims to analyze the effect of Artificial Intelligence adoption and digital marketing capability on MSME business performance through the mediating role of customer engagement among MSMEs in Tangerang City, Indonesia. This research employed a quantitative approach using a survey method involving 150 MSME owners selected through purposive sampling. Data were analyzed using Structural Equation Modeling-Partial Least Squares (SEM-PLS). The variables examined in this study include Artificial Intelligence adoption, digital marketing capability, customer engagement, and MSME business performance. The findings reveal that Artificial Intelligence adoption and digital marketing capability have positive and significant effects on customer engagement. Furthermore, customer engagement positively influences MSME business performance and serves as a significant mediating variable in the relationship between Artificial Intelligence adoption, digital marketing capability, and business performance. The results indicate that the integration of digital technologies and digital marketing capabilities, supported by strong customer engagement, can significantly enhance sustainable business performance among MSMEs. This study contributes to the literature on digital transformation and provides practical implications for MSME practitioners and policymakers in developing technology-based business strategies in emerging economies.

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