Proactive Strategies, Absorptive Capacity and Competitive Advantage of Small and Medium Enterprise (SMEs) firms in East Java Indonesia

Proactive strategy and absorptive capacity are crucial components in building a competitive advantage, particularly in the Small and Medium Enterprise (SMEs) sector. This study examines the moderating role of absorptive capacity in strengthening the relationship between proactive strategy and competitive advantage among SMEs in East Java, Indonesia. The sampling technique employed was non-probability sampling, specifically a purposive sampling method, involving 65 SME owners as respondents. Data were collected through surveys and analyzed using Smart PLS. The findings reveal that a proactive strategy significantly positively affects competitive advantage, and absorptive capacity reinforces this relationship. This research provides theoretical contributions and practical implications for SMEs to remain competitive in dynamic markets, offering new empirical evidence on the moderating role of absorptive capacity in the context of Indonesian SMEs, which has been rarely explored in prior studies.