Causal relationship model of marketing innovation and competitiveness of small and medium enterprises (SMEs) with digital technologies in Thailand

Introduction

It is crucial for entrepreneurs to continually develop potential knowledge to tackle the challenges and opportunities that come their way effectively. This means developing new products and services, improving processes and operations, and expanding the market reach. Investing in knowledge and skill development will assist in promoting small and medium enterprises (SMEs) in Thailand, especially in the agri-food industry, which is growing rapidly in many countries. As entrepreneurs, it is also important to focus on developing abilities and competitiveness. This means creating a supply system that can serve the global market with a focus on quality over price. Unfortunately, many SMEs in the agri-food industry struggle with insufficient competitiveness. However, SMEs are the backbone of the economy in many developing countries that rely on agri-food production (World Bank, 2018; Organisation for Economic Co-operation and Development (OECD), 2019; European Commission, 2020).

According to Bonanno, Golgeci, and Ioppolo (2020), Radicic and Escribano (2015), and Faraaz and Mishra (2019), SMEs in the agricultural food processed products industry are one of the most substantial and fastest-growing enterprises in an agri-food supply chain with the ability to enhance a wealthy industry and sustainable profits in the long term. They are often called the core foundation of the economy because they create jobs, generate income, and contribute to economic growth. The industry is a crucial sector of the economy for many food producers. In terms of products, agri-food-processed SMEs are involved in producing a wide range of food products, including canned fruits and vegetables, dried fruits, fruit juices, and frozen foods. These products are often made using traditional recipes and methods and are known for their high quality and unique flavors.

With the emergence of digital technology, SMEs must embrace market-oriented strategies, innovate their marketing approaches, and develop effective digital marketing strategies to maintain competitiveness in the market. According to the European Commission’s “Small Business Act” (2020), most SMEs often lack digitalization and innovation, which can hinder their ability to compete in a global marketplace. This is particularly important in the context of the COVID-19 pandemic, as many SMEs have had to adapt to new digital ways of working to stay competitive. However, many SMEs need more abilities or competitiveness, which can hinder their success and growth. Common challenges SMEs face include limited access to financing, insufficient technological capabilities, inadequate marketing strategies, and difficulties in finding and retaining skilled employees. These enterprises have a high potential for competition and seek opportunities from food industry growth trends through innovation and digital technologies (Tóth et al., 2019). To increase competitiveness, productivity must be increased to sustainably build wealth for the country (Porter 1990, 2010).

Porter (1990) found that if SMEs could increase their productivity to a higher level, it would result in an advantage over competitors. If enterprises in many industrial sectors increased productivity, it would also result in a higher level of competitiveness. If numerous industries in the country increased productivity, it would lead to a higher level of competitiveness in the country eventually. To achieve this, SMEs seek opportunities from agri-food industry growth trends through marketing innovation and digital technologies (Hossain & Rahman, 2017). Marketing innovation behavior is a crucial and innovative action for SMEs to enhance their competitiveness with digital technology. Digital marketing allows SMEs to improve their marketing strategies, reach more consumers, and increase their market share. Consequently, marketing innovation behavior in agri-food processing SMEs involves various management strategies, such as creating unique product features, packaging, labeling, and developing new product lines with creative communication channels and content that appeal to consumers’ changing tastes and preferences. It also involves utilizing new marketing channels such as social media, mobile marketing, and online marketplaces to reach consumers and engage with them effectively through the mutual share of innovative learning.

Learning by sharing knowledge and innovation in the organization and between organizations in the industry is essential today. SME manufacturers and entrepreneurs have tried to adapt to increase their competitiveness by joining groups for knowledge exchange and mutual sharing to create innovations through marketing innovative behavior or MIB to serve the needs of consumers and society as a key (Flavián et al., 2014). However, increasing market orientation focuses on the needs of consumers and seeks competitive advantages from the three business factors. It includes customers to meet their demands and build relationships with them, competition management to establish differentiation, and resource capability or organizational management (Jaworski & Kohli, 1996; Narver et al., 2000), which may lead to competitiveness in SMEs is still questionable.

Building competitive advantages for SMEs in the agri-food processing industry enables them to develop their market orientation continually. Promoting knowledge is essential to develop and promote entrepreneurs, particularly SMEs, in the agri-food processing industry in Thailand. These are considered the foundation and have a high proportion of supply chain system mechanisms for 70% of the country’s economic system. SMEs have been an essential source of employment in Thailand. The sector employs approximately 20 million people, 30% of whom are engaged in manufacturing SMEs (Office of SMEs Promotion 2020). In addition, Thai SMEs could develop a local market system to an international level with product quality and marketing innovation, regardless of price (Tanapoompichet & Swasdpeera, 2018).

However, one of the challenges in the competitive enhancement of entrepreneurs is still a lack of cooperation in the supply chain system to strengthen and develop the value chain, leading to the development of marketing innovations and enhancing the ability to compete at the macro and micro levels through digital technology. It requires systematic and professional work and intermediaries with international capabilities to develop a wide range of tasks and great support from the government and regulations (Somboonsuke, 2013, pp. 87-90). The easing of rules, regulations, and promotions to build a creative economic system through innovation, according to the World Economic Forum in 2022 (World Economic Forum, 2022), encompasses strategies to promote policy and regulatory reforms to create an enabling environment for SME development and support the creation and strengthening of formal institutions that provide business development and financial services to SMEs on a sustainable basis through innovation with digital technology-based development, resulting in integrative innovations and digital technology for the economy and society in the industry. Although the government had plans and policies to develop and promote such systems, this generally led to the main problem, which was the readiness of SMEs to respond to innovation development, especially in the digital era (Schenker, 2022).

Moreover, the enhancement of market innovation and competitiveness of SMEs in Thailand with digital technology is necessary to study the potential of SMEs for particular products in terms of market innovation behavior and competitiveness. Innovation in marketing has become essential for SMEs to gain competitiveness in the agricultural processed food product industry. SMEs in this sector face many challenges owing to their limited resources, such as finance and technology, and the increasingly competitive market. To compete with larger firms, they must embrace marketing innovation and use digital marketing tools to promote their products effectively. This study developed the following Research Question: Research Question 1 highlights the potential of SME entrepreneurs in the agri-food products industry in terms of market orientation, digital marketing strategy, and marketing innovation behavior. Research Question 2 dealt with current competitiveness. This will enable SMEs to develop effectively owing to marketing innovation behavior and competitiveness driven by digital technology. Research Question 3 discusses digital technology that is acceptable to SMEs. Research Question 4 deals with the type of digital technology that should be applied and how to enhance market orientation, marketing innovation behavior, and competitiveness to achieve digital marketing efficiency.

To overcome the challenges faced by small- and medium-sized enterprises (SMEs), they require more support and investment from the government and other stakeholders. Some measures that could be taken include improving access to technical expertise and knowledge transfer, investing in infrastructure, and streamlining the supply chain with digital marketing strategies. Promoting processed Thai agri-food products and increasing their visibility in overseas markets is also important, which will help boost the competitiveness of SMEs in this sector. With the help of digital technologies, this can be sustainably achieved.

Literature review

Methods

Conceptual framework

After conducting a comprehensive literature review on the topic of digital marketing for SMEs in different contexts, the researcher summarized the conceptual framework of the causal relationship model of marketing innovation and the competitiveness of SMEs with digital technologies in Thailand (as illustrated in Figure 1). The framework highlights the interdependence between marketing innovation and digital technologies, and how they contribute to the overall competitiveness of SMEs in the Thai market. This study provides valuable insights for SMEs seeking to enhance their digital marketing strategies and gain a competitive edge in the industry.

Figure 1. Causal relationship model of marketing innovation and competitiveness of small and medium enterprises (SMEs) with digital technologies in Thailand.

Results

The analysis results of digital marketing efficacy level with market orientation, digital marketing strategy, competitiveness, and marketing innovative behavior of SMEs were shown based on research objectives as follows (Vuttichat and Patchara, 2023):

The results of the study on market orientation, digital marketing strategy, competitiveness, marketing innovative behavior, and digital marketing efficiency of SMEs were presented as shown in Table 1.

The data presented in Table 1 show that SMEs have a high level of market orientation, digital marketing strategy, competitiveness, innovative marketing behavior, and digital marketing efficiency. The highest mean was found for digital marketing efficiency ($\overline{\mathrm{X}}$ = 4.00), indicating that SMEs effectively utilize digital marketing tools to reach their target audience. Competitiveness also scored high on the mean scale ($\overline{\mathrm{X}}$ = 3.97), suggesting that SMEs can compete well in their respective markets.

However, digital marketing strategy has the lowest mean ($\overline{\mathrm{X}}$ = 3.42), which may indicate that SMEs need to improve their overall approach to digital marketing. The standard deviation for the data was between .61-.75, with digital marketing strategy having the highest deviation (S.D. = .75). This suggests a significant amount of variability in the data for digital marketing strategies, which may indicate that SMEs have varying levels of success with their digital marketing strategies.

Marketing innovation behavior also has a high standard deviation ($\overline{\mathrm{X}}$ = .70), indicating that SMEs may have different approaches to innovative marketing techniques. Finally, digital marketing efficacy has the lowest standard deviation ($\overline{\mathrm{X}}$ = .69), suggesting that SMEs are consistently efficient in their digital marketing efforts. Overall, the data suggest that SMEs are generally successful in their digital marketing endeavors but may benefit from a more focused and strategic approach.

The results of the consistency of the causal relationship model of marketing innovation and competitiveness of SMEs with digital technologies in Thailand based on hypothesis and empirical data according to objective 2 can be shown in Table 2.

Table 2 shows the results of the consistency of the causal relationship model of marketing innovation and competitiveness of SMEs with digital technologies in Thailand based on hypotheses and empirical data. The study found that factor measurement models in the causal relationship model were consistent with empirical data as shown in Figure 2 with χ²/df less than 3, CFI and GFI greater than.95, and RMSEA and SRMR less than 0.05 (Wanichabuncha, 2013).

Figure 2. A factor measurement model for the causal relationship model of marketing innovation and competitiveness of small and medium enterprises (SMEs) with digital technologies in Thailand.

Figure 2 shows a factor measurement model for the causal relationship model of marketing innovation and competitiveness of SMEs with digital technologies with the empirical data having good consistency. The statistics for measurement were all acceptable (χ² = 81.14, df = 62, p=.05, χ²/df = 1.31, CFI = 1.00, GFI = .98, AGFI = .93, RMSEA = .03, SRMR = .04) (Wanichabuncha, 2013).

The analysis results of direct and indirect effects of factors related to digital marketing efficiency of SMEs in agri-food processed products based on objective 3 were shown in Table 3.

The results of the statistical initial investigation of the data showed that all variables had skewness less than ±3, kurtosis less than ±10, and Kolmogorov-Smirnov is greater than the significance level of .05, indicating that data distribution was normal according to the preliminary agreement of the structural equation model.

Table 3 shows the effect of market orientation (MARPO), digital marketing strategy (STRATEGI), competitiveness (COMPETE), and innovative marketing behaviors (INNOV) on the digital marketing efficiency of SMEs in agri-food processed products as standard values. The hypothesis testing results are as follows:

The causal relationship model of marketing innovation and the competitiveness of SMEs with digital technologies in Thailand is consistent with the empirical data. For the prediction coefficient (R2), market orientation, digital marketing strategy, and competitiveness all explained the variance in innovative marketing behavior by 89% and the variance in digital marketing efficiency both directly and indirectly through innovative marketing behavior by 18%.

Discussion

The results of the causal relationship model of marketing innovation and competitiveness of SMEs with digital technologies in Thailand can be discussed based on the following research objectives.

The results showed that digital marketing efficiency of small and medium enterprises (SMEs) was at a high level. This was consistent with Konjane and Soonthonsmai (2016), who found that most Thai SMEs entrepreneurs had competitiveness overall at a high level with exchange and transfer production innovation and exchange of marketing innovation, which was in line with innovative marketing behavior and digital marketing strategy. This is consistent with Jones (Jones, 1996) who found that when a small enterprise’s market orientation increases, it affects the return on sales and business sales growth. In addition, a study by Amofah, Gyamfi, and Tutu (2016) examined the relationship between marketing mix and marketing efficiency and found that product, price, promotion, personnel, and physical evidence influenced marketing efficiency in terms of customer repurchase decisions. This was supported by Zahra et al. (2017), who found that increased innovative marketing behavior also resulted in increased business performance and market efficiency. Moreover, Haddad et al. (2019) explored strategies for implementing innovation and found that it could reduce costs and optimize processes and management in various areas, including marketing, and affect the survival and growth small and medium enterprises (SMEs) business.

The causal relationship model of marketing innovation and competitiveness of small and medium enterprises (SMEs) in agri-food products industry with digital technologies in Thailand based on hypothesis and empirical data had a good consistency, consisting of market orientation, digital marketing strategy, marketing innovative behavior, and digital marketing efficacy, indicating market orientation in customer and customer management, competitor and competition management, and resources or organizational management (Jaworski & Kohli, 1996) was related to digital marketing efficiency. This is consistent with studies by several scholars with consistent results (Narver & Slater, 1990; Ruekert, 1992; Jaworski & Kohli, 1993; Pelham, 2000; Narver, Slater, & MacLachlan, 2000).

This model has been confirmed by studies on marketing strategies in the digital era, where consumption methods have been changing. Causal relationship model of marketing innovation and competitiveness of small and medium-sized enterprises (SMEs) with digital technologies in Thailand. This supports the results of Apirungruengsakul and Pasunon (2020), who found that effective digital marketing should be responsive to consumers’ personal needs by offering promotions on various channels, especially contact and increased convenience for purchasing through an automated program. Marketing innovation behavior is positively related to digital marketing efficiency. This was consistent with a study by Zahra et al. (2017), who found that employees’ learning in the organization often occurs through the ethical behavior of leaders who play a role in motivating proactive work. In addition, Haddad et al. (2019) found that for small and medium enterprises (SMEs), innovations that were key process components included initiatives that required management support to brainstorm ideas from multiple parties and then put them to the test and into practice. This creates an innovative culture in an enterprise that is different from its competitors. This can reduce costs and increase efficiency in work processes, leading to organizational success. However, Attiq et al. (2017), Ren and Zhang (2015), and Kong and Li (2018) found that the relationship may occur in the opposite direction in some organizations and in some highly competitive situations. In other words, market innovative behavior with increasing demands for efficiency may result in time pressures, stress, and work-life imbalances for employees, as the hypothesis testing result of H1, which found that market orientation did not positively and directly influence digital marketing efficiency.

There are several potential reasons for the lack of a relationship between market orientation and the digital marketing efficacy of SMEs in agri-food processed products in Thailand, such as limited digital marketing expertise, insufficient investment in digital marketing, and lack of differentiation in their products. SMEs in Thailand may need more expertise and knowledge to leverage digital marketing strategies effectively. Even if an enterprise has a strong market orientation, it may need more technical knowledge or resources to implement effective digital marketing campaigns. Most small and medium enterprises (SMEs) in Thailand may need to invest more resources in digital marketing despite having a strong market orientation (Chinlumprasert & Tawabutr, 2019). This may be due to a need for more understanding of the potential benefits of digital marketing or limited financial resources allocated to this area. Additionally, there needed to be more differentiation in the products. Agri-food processed products may be seen as commodities with little differentiation, making it difficult for small and medium enterprises (SMEs) to stand out in the digital space. In such a scenario, digital marketing campaigns may not effectively drive sales or build brand awareness, even if a company has a strong market orientation. Furthermore, market dynamics are a major obstacle (Chinakidzwa & Phiri, 2020). Broader market dynamics may influence the relationship between market orientation and digital marketing performance in Thailand’s agri-food processed products industry. For example, the level of competition or the size of the market may impact the effectiveness of digital marketing campaigns regardless of a company’s market orientation. Similarly, the business performance of small and medium enterprises (SMEs) can be adapted by focusing on the promotion of integrative new idea generation and market leadership orientation (Sriboonlue & Puangpronpitag, 2019).

Further research is needed to understand why there may be no relationship between market orientation and the digital marketing performance of small and medium-sized enterprises (SMEs) in agricultural food processed products in Thailand. However, a range of factors, including technical expertise, investment, and market dynamics, can influence the effectiveness of digital marketing campaigns in this sector.

However, the result of H2 found that competitiveness negatively and directly influenced digital marketing efficiency with an effective coefficient of -.16. This contradicts a study by Weerawardena and O’Cass (2004), who conducted a survey on the characteristics of market-driven businesses in sustainable competitive advantage and found that running conditions played a vital role in leading to marketing capability as a mechanism to drive or promote marketing capability. According to a study by Taiminen and Karjaluoto (2015), SMEs need to gain knowledge and understanding of digital marketing. They can utilize the optimized advantage of the potential of new digital tools and effectively fulfill the benefits of digital developments. This was consistent with Indrawati, Caska, and Suarman (2020), who found five digital marketing supportive factors in order of priority: funding, followed by government support, business partner, human resource potential, and economic conditions. The primary constraint of this negative relationship resulted from the need for more official and continuous essential support from the government in terms of policies to support technological innovation in practical outcomes and network expansion promotion through partnerships in the supply chain. More funding was explicitly needed for technological innovation and its promotion in small and medium enterprises (SMEs). Thus, findings on the causal relationship between competitiveness and digital marketing efficiency need to be clarified and controversial. Therefore, further studies are warranted.

Marketing innovative behavior positively and directly influences digital marketing, according to H3. This was consistent with Prajogo and Ahmed (2006), who examined the relationship between business efficiency and innovation efficiency in manufacturing plants and services in Australia. The study found that innovative efficiency can be achieved through behavioral and cultural development and the organizational environment. Research and development of technology have resulted in innovative efficiency. Process innovation is more closely related to business efficiency than product innovation in manufacturing facilities. Moreover, Konjane and Soonthonsmai (2016) reported that marketing innovation was positively related to competitiveness in the production and distribution of products, leading to good firm performance.

In addition, Henard and Szymanski (2001) studied new product developments. They found that innovative behavior in management, setting objectives, strategy, and teamwork before introducing a new product was able to build mutual understanding and identify a clear direction, impacting the competitiveness and performance of innovations. This was consistent with many scholars who found that innovative management affects the competitiveness and efficiency of management and marketing performance (Tsai, 2001; Hult et al., 2003; Hult et al., 2004; Tanapoompichet & Swasdpeera, 2018). This result was also consistent with Indrawati et al. (2020), who found that funding, government support, business partners, human resource potential, and economic conditions resulted in the efficiency of digital marketing from the clusters of community enterprise entrepreneurs. Carpinetti and Lima (2009) found that regulatory agencies for clusters of small and medium enterprise (SMEs) entrepreneurs would facilitate collaboration between businesses to increase competitiveness and market efficiency. This is consistent with many scholars who find that innovation is interrelated to market efficiency and competitiveness (Tsai, 2001; Hult et al., 2003; Hult et al., 2004; Taiminen & Karjaluoto, 2015).

The study’s results found that market orientation did not indirectly influence digital marketing efficiency through innovative marketing behavior based on hypothesis H4, which is inconsistent with Jaworski and Kohli’s study (1996). This may be because small and medium enterprises (SMEs) in agricultural food processed products in Thailand are overreliant on traditional marketing methods. Even if an enterprise has a strong market orientation, proactive and reactive market orientations positively impact digital innovation (Zhao et al., 2023). They may need to be more reliant on traditional marketing methods in highly dynamic markets, such as print advertising or in-store promotions. This may limit their ability to leverage digital marketing channels effectively, even if they have a strong understanding of their target markets. It is possible that broader market dynamics influence the relationship between market orientation and digital marketing performance in the agricultural food processed products industry in Thailand or that the power of social capital positively moderates proactive market orientation and digital innovation. In addition, consumer responsibility has a partial mediating effect (Zhao et al., 2023). For example, the level of competition or the size of the market may impact the effectiveness of digital marketing campaigns, regardless of a company’s market orientation.

The findings indicate that digital marketing strategies do not indirectly influence digital marketing efficacy through innovative marketing behavior. However, marketing strategy positively and directly influences innovative marketing behavior, according to H5. In general, digital marketing strategy and marketing innovation of SMEs in agri-food processed products in Thailand are interdependent and critical for the business’s success (Kaewmong & Soytong, 2020). There are several reasons for the strong positive relationship between digital marketing strategies and marketing innovation (Gokalp & Cetindamar, 2021; Kaewmong & Soytong, 2020). A clear digital marketing strategy provides direction and guidance for SMEs to develop marketing innovation. By setting specific goals and objectives, a digital marketing strategy helps small and medium enterprises (SMEs) to identify areas of improvement and opportunities for innovation. However, some researchers have found that digital and environmental orientations positively affect product and process innovation performance; digital orientation enhances SMEs’ resources by drawing attention to existing digital resources (Ardito et al., 2021). With a digital marketing strategy, marketing innovation leads to new and creative ways of reaching the target audience, which can improve the digital marketing strategy. By incorporating new marketing tactics and channels, SMEs can enhance their digital marketing strategies and stay ahead of the competition (Wang & Ku, 2020). A digital marketing strategy helps SMEs prioritize marketing innovation initiatives based on their goals and objectives to ensure that the innovation efforts are aligned with the overall digital marketing strategy and differentiate themselves from competitors. This differentiation can help increase brand awareness, customer loyalty, and overall digital marketing performance, which develops long-term and business performance effectiveness that increases competitive advantage (Wongsansukcharoen & Thaweepaiboonwong, 2023) and the likelihood of success.

However, competitiveness indirectly influenced digital marketing efficiency through innovative marketing behavior, based on hypothesis H6. Competitiveness in SMEs also creates uniqueness in the product of the business that is different from its competitors (Wongsansukcharoen & Thaweepaiboonwong, 2023). The ability and skills of entrepreneurs to manage resources in the organization benefit through the innovative marketing behaviors of individuals in the enterprise, resulting in business profitability and stability, especially for those who use technology in marketing. This was consistent with the findings of Apirungruengsakul and Pasunon (2020), who found that business marketing technology utilization through competitiveness was indirectly related to marketing success through firms’ innovative marketing behavior.

For the digital marketing efficiency of SMEs, the results were consistent with Indrawati, Caska, and Suarman (2020), who found that funding, government support, business partners, human resource potential, and economic conditions resulted in the efficiency of digital marketing from the clusters of community enterprise entrepreneurs. Carpinetti and Lima (2009) supported the results that regulatory agencies for clusters of SME entrepreneurs would facilitate collaboration between businesses to increase competitiveness and market efficiency. This was consistent with many scholars who found that competitiveness affected market efficiency with innovation through digital marketing technologies (Hult et al., 2004; Taiminen & Karjaluoto, 2015; Wang & Ku, 2020; Zmudzinski & Zaborek, 2018; Ardito et al., 2021; Wongsansukcharoen & Thaweepaiboonwong, 2023; Zhao et al., 2023).