Cooperative Facilitation and MSME Digital Outcomes: The Role of Co-Created Digital Dynamic Capabilities

Abstract

As MSMEs increasingly depend on digital technologies for competitiveness and resilience, an unresolved issue is how external facilitation translates digitalisation support into firm-level capabilities, digital maturity, and business performance. This study examines whether cooperative facilitation practices build co-created digital dynamic capabilities (CDDC) and how these capabilities relate to MSME digital maturity and performance. Survey data were obtained from 120 cooperative and MSME facilitators in Central Java, Indonesia. The unit of analysis was the facilitator, with respondents providing assessments based on the MSMEs they supported. Five reflective constructs were assessed through 41 indicators using a two-stage composite procedure. The measurement model was evaluated with SmartPLS, and the structural model was estimated from loading-weighted scores with 5,000 bootstrap resamples. Facilitation intensity and interactive methods strongly predicted CDDC (β = 0.625, p < 0.001), while relational embeddedness contributed positively (β = 0.257, p = 0.002). Both facilitation dimensions directly increased digital maturity, particularly relational embeddedness (β = 0.571, p < 0.001). CDDC improved MSME performance (β = 0.261, p = 0.006), and digital maturity was the strongest predictor (β = 0.591, p < 0.001). However, CDDC did not independently predict digital maturity. The findings support sustained, trust-based facilitation rather than episodic technology training.