ABSTRACT: This study explores the impact of four innovation dimensions – product, process, marketing, and organizational – on the performance and competitiveness of Micro, Small, and Medium Enterprises (MSMEs) in Mataram City, Indonesia. Employing a quantitative approach and Structural Equation Modeling (SEM), the research analyzes survey data to investigate the relationships between innovation dimensions, firm performance, and competitiveness. The findings indicate that organizational innovation has a statistically significant effect on MSME performance, while product innovation is significant at a lower level. Interestingly, no single innovation dimension directly influences competitiveness; instead, performance acts as a crucial mediator. The combined effect of all innovation dimensions contributes considerably to both performance and competitiveness, explaining 81.40% and 86.60% of their variations, respectively. The study underscores the importance of a holistic approach to innovation, with organizational innovation serving as a foundation for enabling improvements in other areas. Practical implications for MSME owners, policymakers, and support institutions are discussed, emphasizing the need for comprehensive strategies and support systems to nurture innovation-driven growth and competitiveness in the Indonesian MSME sector. The research recommends future studies to adopt longitudinal designs, expand sample coverage, explore moderating variables, conduct comparative analyses, examine innovation ecosystems, and employ mixed method approaches to gain a more comprehensive understanding of innovation dynamics within the MSME sector.

Keyword: Innovation Dimensions, MSME Performance, Organizational Innovation, Innovation and Competitiveness