The Effect of Product Innovation and Competitive Advantage on Firm Performance Through Dynamic Capabilities at LocknLock

Abstract

Amidst profound structural disruptions driven by value chain digitalization and stringent environmental sustainability mandates, the global manufacturing landscape exposes a critical innovation paradox where technological advancements frequently fail to guarantee market resilience. Grounded in the synthesis of the Resource-Based View (RBV) and Dynamic Capability Theory (DCT), this study investigates the causal mechanisms linking product innovation, competitive advantage, and firm performance. Employing a quantitative explanatory design, primary empirical data were acquired from 230 strategic management personnel at PT LocknLock Indonesia and rigorously evaluated using variance-based Partial Least Squares Structural Equation Modeling (PLS-SEM). The empirical estimation reveals a counterintuitive reality: product innovation exerts no significant direct impact on firm performance. Instead, the structural model demonstrates that dynamic capabilities operate as an indispensable full mediator for product innovation and a partial mediator for competitive advantage, collectively explaining a substantial 82.0% of the variance in firm performance. These findings decisively dismantle deterministic linear commercialization assumptions, proving that latent innovation assets inevitably devolve into sunk costs without the institutional agility to sense macro-environmental disruptions, seize omnichannel ecosystems, and reconfigure legacy operational architectures. Ultimately, this research dictates a strategic paradigm shift for corporate executives, urging a pivot from exclusive investments in product engineering toward the aggressive cultivation of dynamic governance to secure long-term economic sustainability.