The Influence of Dynamic Capabilities, Financial Literacy, and Financial Inclusion on Sustainability of MSMEs in East Kalimantan, Indonesia: The Mediating Role of Financial Performance

Purpose: This study investigates the influence of dynamic capabilities, financial literacy, and financial inclusion on the sustainability of MSMEs in East Kalimantan, Indonesia, explicitly examining the mediating role of financial performance. The study aims to explore how internal competencies and financial behaviors shape long-term business resilience. Design/methodology/approach: A quantitative explanatory research design was applied using Partial Least Squares Structural Equation Modeling (PLS-SEM) to analyze data from 203 MSME respondents, determined through the G-Power sampling method, across nine districts/cities in East Kalimantan. Findings: The results show that dynamic capabilities significantly enhance financial performance but do not have a direct impact on sustainability. Financial literacy has a positive impact on sustainability but a negative influence on financial performance, while financial inclusion significantly contributes to both. Financial performance partially mediates the relationship between financial behaviors and sustainability but does not directly drive it. Research limitations/implications: The study is limited to MSMEs in one Indonesian province and does not consider external institutional factors or cultural contexts that may influence financial decision-making and long-term sustainability. Originality/value: This study offers novel insight by integrating Dynamic Capability Theory, Resource-Based View(RBV), and Signaling Theory in the MSME context, highlighting how internal strengths and financial access jointly influence sustainability. The findings provide evidence-based recommendations for policymakers to strengthen MSME capacity through inclusive and strategic financial interventions.