The Influence of Capability, Business Innovation, and Competitive Advantage on a Smart Sustainable Tourism Village and Its Impact on the Management Performance of Tourism Villages on Java Island

Abstract

Tourism has become one of the biggest industries in the world. Many people carry out tourism activities for relaxation, fulfilling curiosity, gaining new experiences, and entertainment purposes (pleasure). This study analyzes the effect of capability, business innovation, and competitive advantage on a smart sustainable tourism village and the impact this has on the management performance of independent tourism villages on Java Island. The methods used in this study include descriptive statistical tests and structural equation modeling (SEM) tests operated through the AMOS program. The sample included 360 respondents who were managers of tourist villages on the island of Java. The questionnaire was determined based on the probability sampling method and non-probability sampling, namely, simple random sampling and convenience sampling. From various aspects and criteria, the data proved that the average value generated from the research unit produced a score of 4, which means good. The results revealed three influential variables: tourism village capability having a positive and significant effect on the smart sustainable tourism village; the smart sustainable tourism village having a positive and significant effect on tourism village management performance; and business innovation having a positive and significant effect on tourism village management performance.

1. Introduction

Tourism is an externally sensitive industry so it is particularly vulnerable to exposure to various risks and to being affected by major crises that occur. Crises in the tourism sector have occurred before, such as the 11 September 2001 terrorist attacks in the United States, the atypical pneumonia epidemic in 2003, the tsunami in the Indian Ocean in 2005, the Zika virus epidemic prior to the Rio Olympics in Brazil in 2016, and, most recently, the crisis due to the COVID-19 pandemic. The implications of all of these crises caused severe damage to the tourism industry [1]. The COVID-19 pandemic resulted in a decrease in the global tourism sector’s Gross Domestic Product (GDP) by USD 2.7 trillion or 30% of the global GDP year on year [2]. In line with the global hit to the tourism sector, the Indonesian national tourism sector also felt the impact of the pandemic, which was quite significant. Data from 2020 show that from January to July 2020, the number of foreign tourist visits to Indonesia reached 3.25 million, down 64.64% compared to the same period in 2019, which amounted to 9.18 million [3].

The COVID-19 pandemic also emphasized a shift in the tourism paradigm from mass tourism (before the 1980s), to alternative tourism (1980–2000s), to quality interest tourism (2000–2020s), and now, in the era of new normal tourism, to customized tourism. In this case, customized tourism can be interpreted as a tourism orientation that is personalized, sanitized, and more concerned with security and health preferences. This special interest in tourism is characterized by a smaller scale but can be more evenly economically distributed and is more environmentally friendly when tourism villages are one of the mainstays. Tourism villages are an alternative tourist destination that continues to grow in Indonesia: in 2015, such villages only numbered 1459 but in 2021, there were 7275 tourist villages [4]. However, this development still creates a significant amount of work for the population because, of the existing tourist villages, only 0.03% have the status of an independent tourism village; less than 10% are of advanced tourism village status; and the remaining 90% still have the status of a tourism village. The status of pilot villages needs to be developed; in terms of management, they still require improvement so that they can compete with tourist villages that have an independent or advanced status. In general, a tourism village can be interpreted as an area that has the potential to be a unique tourist attraction, with a community of people who can create a combination of various activities and supporting facilities to attract tourists. The Ministry of Tourism and Creative Economy of the Republic of Indonesia classifies tourist villages into four levels: pilot tourism villages, developing tourism villages, advanced tourism villages, and independent tourism villages. The criteria for an advanced tourism village include that (a) there is local community awareness for tourism development; (b) it has been visited by many domestic and foreign tourists; (c) the tourist facilities are sufficient; and (d) the village tourism organizations are able to manage the tourism, both in utilizing village funds and in the context of improving the village economy. Independent tourism villages, which are the focus of this study, meet the following criteria: (a) the local community has carried out product innovation and diversification; (b) the village is known by foreign tourists and has been recognized worldwide for implementing the concept of sustainability; and (c) the condition of the facilities and infrastructure follows international standards or, at least, ASEAN standards.

One of the independent tourism villages that has achieved success in the three criteria mentioned above is the Nglanggeran tourism village in Yogyakarta. Many achievements have been made by this tourist village, including when it won the Best Tourism Village title at the United Nations World Tourism Organization (UNWTO) 2021. Nglanggeran competed against 43 other tourist villages from around the world for this title, including several tourist villages from outside Indonesia, such as Caspala (Argentina), Castelo Rodrigo (Portugal), and Batu Puteh (Malaysia). The nine basic criteria of the assessment include (a) culture and natural resources; (b) the promotion and conservation of natural resources; (c) economic sustainability; (d) social sustainability; (e) environmental resilience; (f) tourism potential and development; (g) tourism governance and priorities; (h) infrastructure and connectivity; and (i) health, safety, and security. The notion of Nglanggeran being a tourism village started in 1999; at that time, it focused on the conservation of ancient mountains. Then, in 2007, Nglanggeran became a tourist village through an initiative that involved the youth of the village managing all of the tourism activities. The Nglanggeran tourism village rapidly developed after the establishment of an official management institution, namely, the Tourism Awareness Group (Pokdarwis), in 2013, which was the beginning of the village’s professional management.

In 2015, Nglanggeran also became a pioneer of the e-ticketing system in the management of tourism villages. According to the manager of the system, Nglanggeran tourism village was able to create considerable economic growth, which, in 2012, generated an income of IDR 81,225,000 and increased significantly in 2019 by IDR 3,273,593,400. Currently, there are at least 80 homestay units offered and around 300 people involved in various tourist attractions in the Nglanggeran tourist village. The success of the village is due to the individual and collective capability of the village to develop a series of programs. All concepts, visions, programs, and tourist activities in Nglanggeran are purely designed and made by the people of Nglanggeran village themselves. Various village potentials in the form of natural culture are used as a force to produce product innovations that are different from other tourist villages. Nglanggeran’s various tourism strengths have become an authentic part of the village and provide a competitive advantage that is difficult for other tourist villages to match. The use of digital media and a single-portal website and ticketing system has also made Nglanggeran one of the tourist villages that has successfully implemented a smart, sustainable tourism village.

Despite the success story of Nglanggeran tourist village, many tourist villages in Indonesia are currently far from achieving independent category status. Many are villages that experience “suspended animation” due to the lack of strong capabilities and low innovation. This limits an independent tourism village to achievements on paper alone and hinders them from putting their ideas into practice on the ground. This is, of course, contradictory considering that an independent tourism village should have the ability to solve its own problems and be able to uphold the principle of sustainability. One of the capabilities that must be possessed by the manager of a tourist village is the ability to prevent activities in a tourist village from becoming paralyzed due to poor management. In general, the problems related to the capability of tourism villages in Indonesia include (a) limited resources, i.e., human resources, finance, infrastructure, and accessibility; (b) a lack of coordination and collaboration between local governments, local communities, and related stakeholders, which can hinder the development of tourist villages; (c) low-quality, ineffective, or unprofessional tourism village management due to lack of knowledge, skills, and experience in managing tourism destinations, which can hinder growth and increase the risk of environmental degradation and cultural damage; (d) a lack of marketing and promotion, including building brand image, utilizing information technology, and utilizing appropriate marketing strategies, which can hinder the growth of tourism villages; (e) tourism policy uncertainty that hinders investment and long-term development; and (f) a lack of environmental and cultural awareness or awareness of the importance of environmental sustainability and cultural preservation, thus leading to environmental damage, cultural degradation, and social conflict. Education and an awareness of the importance of environmental and cultural preservation need to be increased in tourist villages. These problems have also been exacerbated by the COVID-19 pandemic over the last 3 years. This is corroborated by data from the Desa Wisata Institute, which stated that 99% of tourism villages were required to cease tourism activities due to the COVID-19 pandemic [5].

Tourism village managers also face difficulties in recovering from the crisis. One of the ways of achieving this is by meeting the Cleanliness, Health, Safety, and Environment (CHSE) standards of the Ministry of Tourism and Creative Economy; however, the pass rate for certification is only 1% of the total population of tourist villages in Indonesia. The problem of innovation in tourist villages in Indonesia can cover several aspects, namely, limited human resources; financial and infrastructure limitations that limit the ability of tourism village managers to innovate; and the low quality of management in terms of strategic planning, weak management, and poor understanding of the development of sustainable tourism villages. This is the case in Cibuntu Village, which has the status of an independent tourism village but very few tourists actually visiting due to weak innovations. Competitive advantage is also a crucial factor to be able to compete in this new normal era. Data from the World Economic Forum [6] regarding the Travel and Tourism Competitiveness Index reveal that Indonesia is currently in 31st place out of 117 countries, as measured by its level of competitiveness. Indonesia’s competitiveness index rose nine ranks in 2019 but the level of increase in terms of national competitiveness still seems to have not materialized in tourism villages.

One of the reasons for the helplessness of tourism village managers due to the pandemic is the passiveness of managers in utilizing technology. Wijaya [7] states that the problem that arises in increasing the competitiveness of the tourism village industry is lagging in utilizing Information and Communication Technology (ICT). This is because, in the future, tourists will utilize technology in travel planning to a significant extent in order to reduce direct contact and most millennial tourists come from areas that are experiencing rapid development, such as cities with easy access to technology [8]. Basic ICT, digital networking, information management, and media utilization form the concept of digital literacy in improving the quality of tourism in line with technological developments [9]. This argument is reinforced by Del Chiappa and Baggio [10], who state that the digital transformation of tourist destinations will result in them becoming smart destinations. The measurement of Indonesia’s tourism competitiveness by the World Economic Forum in 2019 shows that the ICT readiness of the Indonesian tourism industry is still very low, namely, by a score of 4.7 (scores range from 1 to 7, where 1 = worst and 7 = best), ranking 67th out of 140 countries. The score specifically measured the level of readiness of tourist villages in the Special Region of Yogyakarta in terms of utilizing ICT [7].

The Ministry of Tourism and Creative Economy of the Republic of Indonesia [11] stated that 63% of traveling activities are currently searched for, ordered, and sold online and 50% of online travel sales use more than one gadget. Around 200 reviews per minute are posted on TripAdvisor regarding traveling. This is very important, especially considering that the number of internet users increased globally by 4% in 2022, with 62.5% of the world’s total population being active internet users [12]. With this rise, digitization is becoming increasingly important for business growth in the tourism sector [13]. One other crucial factor that makes tourism villages powerless from the crisis is unsustainable management. Research conducted on Tidung Island, Seribu Islands Regency, Special Region of Jakarta, found that tourism activities had environmental impacts, including spatial planning that became chaotic due to the careless construction of homestays, the accumulation of waste both on the coast and in villages, and a water crisis due to the massive exploitation as a result of tourism activities [14]. The inability of tourism village managers to successfully manage their villages is the reason why this sector failed so badly during the COVID-19 pandemic. A total of 15.5 tourism villages suffered a loss of more than IDR 100 million and the rest suffered a loss of at least IDR 25 million as a result of canceled trips [5]. Therefore, the sector needs a lot of improvement to build tourist villages that can compete and become alternative tourist destinations that are feasible and resistant to crises.

Based on the empirical phenomena described above, the question that arises in this research is how the management of tourism villages in Indonesia is influenced by tourism village capabilities, business innovation, competitive advantage, and smart sustainable tourism villages to achieve good performance for the sustainability of tourist villages. This research is a development of previous research conducted by Coros et al. (2017); however, this study was carried out in a tourist village on Java Island in 2022 [15]. The difference between this and previous research is that this study includes the capability of tourism villages (organizations and individuals). Organizational capacity is also necessary in this study because researchers want to know the ability of a tourist village to manage its organization, which can be seen from leadership and coordination, external partnerships, the capacity to develop tourist attractions, and the capacity to promote tourism villages.

2. Literature Review

2.1. Tourism Village Capability

Tourism activity in rural areas can make a significant contribution to the rural economy and, in the context of sustainable rural development, its contribution can be seen not only in financial terms but also in terms of employment, nature conservation, the adoption of new work practices, and the revitalization of passive and poor rural areas [15]. Winter and Kim (2021) proved that the capability approach can help investigate the impact of tourism development on poverty reduction and the welfare of the poor in a more holistic and nuanced way by considering the plural and relative nature of poverty and well-being [16]. Furthermore, Surmeier (2020) [17] also found that the capability of a manager can contribute to the sustainability of the tourism business in a destination. In her research, Pranita (2016) explained that community capacity in managing tourism includes awareness in pioneering the development of tourism potential, knowledge of the concept of a tourist village, the ability to serve tourists, the ability to process souvenirs, and the ability to manage tourist attractions [9]. An additional dimension, according to Surmeier (2020), is sensing capability—it is very important for tourism village managers to be sensitive and able to see the potential of what is happening [17]. Taken from the various existing theories, the capability dimensions used in this study are the dimensions of organizational capability, dynamic capability, and digital capability. These three dimensions will be used to measure the capability of tourism villages on the island of Java. This is important considering that the management capability problem has led to the inability of tourism attractions to be effectively, efficiently, and sustainably managed. Moreover, the tourism village managers have not been able to work together with external partnerships or external stakeholders in order to achieve sustainable tourism village development.

2.2. Business Innovation

Innovation is considered an opportunity to change a business so that it can produce a different product or service [18,19]. According to Du Plessis (2007), innovation is a change in the output of a business caused by new knowledge and ideas, intended to improve business processes and structures to produce better products and services [20]. Based on the literature review of previous research, in this study, business innovation is defined as change according to the definitions put forward in [18,20,21]. In addition, business innovation is also associated with the application of something new [20,21,22,23] and changes in business models [21] that lead to better outcomes [19]. According to Bounckne et al. (2016), the dimensions of business innovation are new technologies, new advantages, new features, new markets, and new designs [24]. Similar dimensions were posited by Shahwan (2015), who used business models, technology, and products as indicators of business innovation [25].

Business innovation is increasingly considered a key success factor in tourism development and destination management. Innovation orientation in tourism destination organizations has a more positive impact on the performance of tourism destination management. This positive impact can be achieved through the se of resources for innovation processes, such as research and development funding, resulting in updated marketing strategies that can encourage performance improvement so that the development of tourist villages can be carried out sustainably [26]. Innovation is a strategy to increase organizational competitiveness [27]. Tourism villages that offer monotonous attractions without thinking about product innovation will eventually be abandoned. Hjalager (2010) emphasized the need for tourism workers to think about creating and maintaining innovations for the benefit of society and tourists [28]. If carried out effectively, business innovation, as a change in the form of new ideas, will later affect the sustainable management of tourist villages. The tourism village that will be studied will be assessed for its ability to change the organization, make new policies, carry out marketing business innovations (social media, websites, video marketing, direct email), carry out tourism village promotion techniques (discounts, giveaways, vouchers), perform service pricing techniques (penetration, psychological, variation), develop products (natural beauty, culture, artificial attractions), and cooperate with the Travel Bureau by introducing tour packages to potential tourists.

2.3. Competitive Advantage

In the tourism context, competitive advantage plays a crucial role for stakeholders in terms of increasing market share [29]. Competitive advantage is defined as the ability to increase expenditure on tourism, find ways to attract visitors, provide memorable and satisfying experiences with a profitable business approach, improve the welfare of local communities, and, of course, maintain the natural capital assets of destinations for the benefit of future generations. A destination’s competitive advantage is also translated as the destination’s ability to maintain or improve its position in the market [30]. Bris and Caballero (2015) explained that competitive advantage is how countries and companies manage the totality of their competencies to achieve prosperity or profit [31]. Experts suggest that there must be drivers of competitive advantage that destinations can use for benchmarking purposes. In this study, the construction of competitive advantage is considered to be the attitude of an institution skewing toward looking for ways to remain competitive with others. Based on several previous studies, the dimensions that are usually used in the topic of competitive advantage are typically divided into macro dimensions and micro dimensions. In this study, because the case study used is a tourist village acting as a tourist destination, the micro perspective of competitive advantage is used, with indicators including core resources, infrastructure, destination management, environmental consideration, and price [32,33]. A new dimension is also added, namely, information and communication technology (ICT) readiness, which has a strong correlation with the extent to which digitalization has been implemented in tourism villages to create smart tourism villages (smart tourism).

2.4. Smart Sustainable Tourism Village

Suta et al. (2020) stated that the development of sustainable tourism is very important to ensure that interactions and relationships between the environment, socio-culture, and the economy are sustainable; they highlighted the importance of paying attention to the welfare of local communities and their culture as well as the creation of long-term economic benefits for all stakeholders involved [34]. This strategy is unified into one sustainable business approach that refers to the ability of companies or business stakeholders to respond to their short-term financial needs without compromising their (or other people’s) ability to meet their future needs [35]. Another study was also conducted by Hamid et al. (2020), which explored the relationship between the implementation of sustainable tourism practices, focusing on the two main areas of sustainable business and destination management, and business performance; a positive relationship was found between them [36].

The implementation of a smart sustainable tourism village can be measured according to several elements that are almost the same, namely, facility design, employee development, marketing strategy, community development, and supply chain effort [37]. Based on some of the previous studies, the construct for measuring the implementation of sustainable tourism is how far the implementation of sustainable tourism has been carried out in tourist villages. Apart from being sustainable, tourist villages must also start to take advantage of further technology to become smart destinations. Smartness is important in order to take advantage of the integrated interconnectivity and interoperability of technology. Smartness aims to re-engineer processes and data to produce innovative services, products, and procedures that ensure the maximization of stakeholder value [37]. The literature shows elements related to smart sustainable tourism villages, including, among others, those outlined by the Global Sustainable Tourism Council (2013), that measure how sustainable tourism is carried out by collaborating several dimensions, including sustainable management practices, and maximizing social and economic benefits, cultural benefits, and environmental benefits [38]. The dimensions and indicators added and adjusted in the smart sustainable tourism village variable are indicators of waste management following circular economy principles, namely, regenerative and restorative [38]. Then, the dimensions of smart tourism are taken from the Ambience Intelligence Tourism approach [37] and used by lodging managers and destination managers, such as those in tourist villages; thus, these indicators and dimensions are used in the current research.

2.5. Performance of Tourism Village Management

Concerning tourist villages, the sustainable business performance indicators that can be used include the economic, social, and environmental performance of the tourism business [39,40]. The adoption of a triple bottom line perspective requires organizations to broaden their focus from one criterion of economic performance to three dimensions of sustainability (economic, environmental, and social performance) [41]. The simultaneous consideration of economic, environmental, and social priorities can give companies a competitive advantage, enabling them to outperform competitors in winning target customers [42,43]. This shows that the importance of sustainability performance can be measured from an economic, social, and environmental perspective.

The success of the performance of a tourist village should not be measured solely by quantity but also must consider the quality aspect. This means that the volume/quantity of tourist visits accompanied by income per year and employment absorption must also be balanced with the quality of the tourism activity itself. In this case, the village community involved in tourism work has fulfilled its income equivalent to the applicable minimum wage for work and has received social protection, such as from gender discrimination. Social sustainability can have three general orientations: towards changing behavior to achieve environmental goals; towards the preservation of socio-cultural patterns and practices; and towards reducing poverty and inequality [44]. Husgafvel et al. (2015) identified indicators of social sustainability from the perspectives of communities and companies [45]. Santos and Moreira (2022) measured social sustainability using employee wages and the average term for earnings (PMR) was used to measure social sustainability from the perspective of stakeholders (clients) [46]. Santos (2023) argued that workplace dignity is positively correlated with corporate social sustainability [47]. The improving reputation of the tourism sector as a workplace has significant implications for addressing the growing skills shortage. Proactive efforts to improve working conditions, provide fair opportunities for career advancement, and foster a culture of dignity in the workplace are essential [47]. Taken from the various existing theories, the dimensions used in this research are financial growth, consumer satisfaction, internal business processes, learning, and growth.

2.6. Previous Research

The table below shows previous research regarding the influence of capability, business innovation, and competitive advantage on smart sustainable tourism villages and its impact on the management performance of independent tourism villages.

Research on the performance of tourist villages in relation to business innovation and smart sustainable tourism villages, which is the focus of this study, has rarely been carried out by previous researchers. This is one of the reasons for conducting this research; it can be said to have novelty. The novelty or originality of this research is as follows.

First, this study discusses the effect of business innovation and smart sustainable tourism on the performance of managers in tourist villages; they are associated with two independent variables, namely, village capability and competitive advantage. Prior research on business innovation has more to do with business models [48,49,50], with few links made between business innovation and smart sustainable tourism village development.

Second, the novelty of this study can also be seen from the unit of analysis, which is different from previous studies. The unit of analysis in this study is the tourist village while the unit of observation is the head of the tourism village organization. In previous research on business innovation, the units of analysis were manufacturing companies [50,51]; technology companies [49]; and micro, small, and medium enterprises (MSME) [52]. Research using the unit of analysis of the tourism industry has been carried out by several researchers [53,54] while research using the tourism village analysis unit itself has not been linked to tourism village capability, business innovation, or competitive advantage, especially in tourist villages on the island of Java.

Third, the performance variable in this study specifically involves the performance of tourism village managers. The performance variable for the management of a tourist village is measured, among other things, by looking at how much tourism contributes to the village and the arrival of tourists to the tourist village. These two factors have never been examined in previous studies.

The tourism village capability variable in this study uses the dimension of capacity to manage attractions and souvenirs; whereas, previous research did not use this dimension because the unit of analysis is service and manufacturing companies. The business innovation variable in this study uses the dimension of tourism products (tourism commodities) while previous studies used the dimensions of other general products. Meanwhile, the competitive advantage variable in this study adds a dimension of information technology readiness that has never been used in previous research on tourism villages. Furthermore, the measurement of the smart sustainable tourism village variable in this study uses the dimensions of e-tourism, sustainable management, circular economy, and smart destination. Previous studies did not use these dimensions. Based on the elaboration above, it can be seen that the novelty of this research is its focus on the influence of tourism village capability, business innovation, and competitive advantage associated with smart sustainable tourism villages on the performance of tourism management, especially regarding tourism village managers. The state of the art nature of this research involves (1) discussing the influence of tourism village capability, business innovation, and competitive advantage on tourism performance, especially regarding the management of tourist villages; (2) the research using a tourism village analysis unit on the island of Java; and (3) sustainable tourism performance measurement indicators being measured while taking into account economic, environmental, socio-cultural, and smartness aspects.

In this study, there are several forms of relationships or equations to be tested, as follows:

• The effect of capability on smart sustainable tourism villages on the island of Java;
• The effect of business innovation on smart sustainable tourism villages on the island of Java;
• The effect of competitive advantage on smart sustainable tourism villages on the island of Java;
• The effect of tourism village capability on the management performance of tourist villages on the island of Java;
• The effect of business innovation on the management performance of tourist villages on the island of Java;
• The effect of competitive advantage on the management performance of tourist villages on the island of Java;
• The effect of smart sustainable tourism villages on the management performance of tourist villages on the island of Java.

3. Materials and Methods

The research was conducted from December 2022 to March 2023 in 12 tourism villages on Java Island. The sampling technique used in this study was a combination of probability sampling and non-probability sampling, namely, simple random sampling and convenience sampling. Simple random sampling was chosen to provide equal opportunities for each manager of the tourist villages while the convenience sampling technique was used to accommodate any individual who met the researcher by chance. These individuals could be used in this study if they were deemed suitable as a data source. This means that, in this case, the individuals involved were proactive in managing each element of the tourism village at the intervention site both from the village government and from Pokdarwis in the areas of scouting, transportation, accommodation, arts, and agro-tourism. In the context of the research sample, according to Hair et al., the requirement for the number of samples that must be fulfilled should be at least 5–10 times the number of indicators. The indicators used in this study totaled 55 so the number of respondents required was at least 330 [55].

The research instrument used was a closed questionnaire guided by a Likert scale ranging from 1 to [56]. The data obtained from the questionnaire instrument were then analyzed using the one score one criteria method, which is an analytical model used through the development of an elaboration of a series of questionnaires in collecting data and evaluating various variables that have been determined by researchers [57]. The questionnaire instrument used needed to be tested using validity- and reliability-measuring instruments to determine the feasibility of each question item that has been built into this study. Validity testing was carried out to measure the extent to which the questionnaire, as a research instrument, could be used in this study [58,59,60,61]. The validity test was carried out with the help of SPSS software version 26 with a significance value of 5%. The results of the validity test are said to be valid if the r-count is greater than the r-table and become invalid if the r-table value is greater than the r-count. The reliability test is used to determine the extent to which research instruments can be trusted [58,59,60,61]. The reliability of this research instrument was tested using Cronbach’s alpha formula method [59]. A variable or construct can be said to be reliable if it gives a Cronbach alpha value of >0.07 [62]. The data analysis technique used was descriptive quantitative and structural equation modeling (SEM), which was operated through the AMOS program.

4. Results

4.1. Identity of Tourism Village Respondents

Descriptively, the respondents who were involved in this study were 71% male and 29% female, with the reproductive age dominating among the managers of the tourism villages: 27% were aged 17–25 years and 29% were aged 26–35 years. In the context of educational background, the data show that high school/vocational high school graduates dominated at up to 53%, followed by junior high school graduates at 20% and those with a bachelor’s degree at 16%. Based on the existing data, as many as 57% of the respondents, as managers of developed tourism villages, currently do not receive an ideal income or remain below the Minimum Worker’s Wage (UMP) value of IDR 1,991,716, which is the minimum value of the average of the 12 research locations/related provinces (West Java, Yogyakarta, Central Java, and East Java).

4.2. Research Instrument Test (Validity and Reliability Test)

If r-count ≥ r-table (two-tailed test with sig. 0.05), then the instrument or question items have a significant correlation with the total score (declared valid). Furthermore, the reliability test shows that the Cronbach’s alpha value obtained is 0.879 and the r-count (0.879) is greater than the r-table (0.7). That is, the five variables and eighteen indicators in the research instrument are classified as reliable/good.

4.3. Descriptive Statistical Analysis

To create a sustainable tourism village on the island of Java, it must consist of several important aspects and criteria that must be considered. These are presented in Figure 1.

Tourism Village Capability: The data in Figure 1 show that the various criteria from the tourism village capability aspect produce an arithmetic mean of 4, which means it is classified as good (Figure 1). The good category in this capability variable confirms that they can develop the tourism village that they manage from operational, dynamic management, and digital utilization perspectives. This indicates the ability of managers to lead their organizations in formulating the concept of a tourist village, compiling work and service standard operational procedures (SOP), and developing tourist attractions to serve tourists. In addition, the managers of developed tourism villages, such as Pujon Kidul, Nglanggeran, Candirejo, and Cibuntu, have also utilized the Online Travel Agent (OTA) application as an approach to follow demand in the new normal tourism era and the 4.0 era. To improve economic growth significantly, island/tourist destinations should be smart, which would be exemplified by improving digital literacy and employing blockchain technology regarding integrating all stakeholders and co-creating experiences within the smart platform and ecosystem [9]. This is because tourist preferences currently depend on the distribution of digital information systems as a basis for considering utilizing the tourist attractions offered. The Nglanggeran and Pujon Kidul tourism villages provided good lessons where they managed to maintain the dignity of operational and dynamic capabilities. This is evident from the success of managers in terms of operational and dynamic capabilities and innovation in developing tourism potential—i.e., natural, cultural, and creative tourism products and services that are fully run by local communities under the auspices of Pokdarwis and Village-Owned Enterprises (BUMDes). Furthermore, Manaf et al. [63] explained that to achieve more organized and manageable activities, Pokdarwis created seven groups of attractions: nature/outbound attractions, arts, farms, culinary tours, homestay tours, SPA tours, and merchandise.

Business Innovation: According to various criteria, the data show that there is a positive value (score 4.1) that is achieved from the results of implementing business innovations in independent tourism villages on the island of Java (Figure 1). This also confirms that the managers of independent tourism villages have a fairly deep understanding of the importance of motivation and consistency in developing new tourism products and marketing innovations. The community views ecotourism development as stimulating new economic growth and revitalizing various degraded cultural elements [64]. For example, several ecotourism product innovations in Nglanggeran village are classed as creative economy products, such as mask batik, pottery, spa concoctions, processed chocolate, and hand-drawn batik with the ancient volcano motif. The Ministry of Tourism and Creative Economy (2021) noted that there were several proud achievements from the Nglanggeran tourism village, such as the CIPTA Award from the Indonesian Ministry of Culture and Tourism in 2011, the Champion II award from the 2013 National Level Achievement Social Funding (PNPM) for Tourism Recipient Villages, Winner of the Best ASEAN tourism village with the 2017 community-based tourism (CBT) concept, Winner of the ASEAN Sustainable Tourism Award 2018, and the award for the Sustainable Tourism Village of 2021. This indicates that the role of local youth is a key factor in the successful development of Nglanggeran tourism village, not only in utilizing the existing tourism potential but also in their ability to protect the interests of local communities in interacting and collaborating with relevant stakeholders to ensure a sustainable tourism system [63].

Competitive Advantage: The data show that the competitive advantage of independent tourism villages on the island of Java is in a good dimension, producing a score of 4 (Figure 1). This indicates that there is strong motivation and consistency from the managers of independent tourism villages to develop various elements of their tourism from year to year in terms of tourism products and services, infrastructure, environmental sustainability, and information technology transformation. However, it is worth noting that the competitiveness of independent tourist villages will always be faced with challenges, such as consistency in maintaining the rhythm of superior tourist destinations, as well as new tourist trends or even a new tourist destination. Research shows that the sustainability value of Cibuntu tourism village is 71.06, with a fairly sustainable status; this value was obtained from the five dimensions of sustainability, namely, the socio-cultural dimension (79.53%), the economic dimension (83.75%), the institutional dimension (77.72%), the infrastructure dimension (63.81%), and the ecological dimension (50.49%) [65]. The problems faced in the development of the Cibuntu tourism village include inadequate infrastructure and facilities, limited human resources, and tourism promotion that has not been maximized. If these obstacles cannot be handled properly, it can reduce the tourism competitiveness of the Cibuntu tourism village against the nearest tourist village, namely, Bantaragung.

Therefore, an independent tourism village needs to strengthen its branding image. Competitive advantage or competitiveness can be measured based on the destination image or on the framework of the “Diamond of National Competitiveness”, which was popularized by Porter, as quoted in [66,67], namely, factor conditions; demand conditions; related and supported industries; and firm strategy, structure, and rivalry. Destination branding is a set of marketing activities that (1) support the creation of a name, symbol, logo, wordmark, or other graphic that readily identifies and differentiates a destination; (2) consistently convey the expectation of a memorable travel experience that is uniquely associated with the destination; (3) serve to consolidate and reinforce the emotional connection between the visitor and the destination; and (4) reduce consumer search costs and perceived risk [68]. Therefore, independent tourism villages on the island of Java need to maintain the authentic dignity of their competitive advantage so that they are not trapped in the “tragedy of commons” in the tourism industry, which causes a decline in competitiveness with various implications for losses. Building a reputation must consider several important aspects, such as (1) opening up potentially controversial questions of destination authenticity; (2) brand narratives; (3) performative leadership and authorship; (4) storytelling; and (5) aesthetics [69].

Smart Sustainable Tourism Village: The data show that the sustainable tourism village aspect produces an average score of 4, or good (Figure 1). In terms of e-tourism and smart destinations, the research unit sampled is currently utilizing ICT in managing tourist villages both in the form of using the IoT (Internet of Things) and creating digital ecosystems in managing tourist villages. For example, the management of the Candirejo tourism village displays its various circular economy products on websites and digital platforms as a form of direct marketing in the 4.0 era. They think that in this new normal tourism era, all markets are at the technological literacy stage where, in seeking tourist information, they often carry out basic research from various platforms in the digital world, either through the official single portal website or from social media, TikTok, YouTube, and Instagram. Various factors affect the performance of village management, including the information system [70] and the use of technology [71,72,73]. In addition, the interaction between the benefits of technology and the diffusion of information system innovations has an impact on organizational performance [74]; even the benefits of technology act as a full moderator between information system diffusion innovations and the performance of internal village government processes [75]. In terms of sustainable management, Rachmatullah et al. reminded us that one of the crucial aspects that needs to be called for in the success of ecotourism development is land rights or land ownership, which must be fully owned by local communities [76]. This is because it is through land ownership that local people can truly be said to have full rights over ecotourism development; only this can guarantee that local people will not simply become laborers in the ecotourism development process [76].

Tourism Village Management Performance: The data in Figure 1 show that, based on an attitude scale, tourism village management performance, which includes financial growth, tourist satisfaction, internal business processes, and learning and growth, obtains an average value of 4, which means good. As an illustration of financial growth, the Pujon Kidul tourism village has succeeded in obtaining a foreign exchange of IDR 9,112,559,440 in 2018 and grew in 2019 by IDR 17,658,023,447. Ira and Muhamad stated that the Pujon Kidul tourism village has created jobs for as many as 2000 people or nearly 50% of the total village population [77]. The Nglanggeran tourism village achieved a Customer Satisfaction Index (CFI) result of 77.3%, which means visitors are satisfied with all aspects of management in the village [78]. The success of village development lies not only in the ability of the village administration but also in the extent of community participation in carrying out the development program [79]. Ali and Saputra concluded that the performance of village government is highly dependent on the implementation of village governance and human resources [80].

4.4. Structural Equation Modeling (SEM) Test

An analysis of the results of data processing at the initial SEM model stage was carried out by conducting compatibility and statistical tests. The results of the data processing for the analysis of the initial SEM model can be seen in

Table 1. Previous research.

Scholars	Similarity	Difference	Findings
Operational Capability—Competitiveness
[81] Clustering analysis prioritization of automobile logistics services. Industrial Management and Data Systems	Researching the company’s capabilities and competitive advantages	The case study used is an automobile company	Four distinct producer groups were identified using a two-stage clustering approach. The cluster separates logistics preferences and outsourcing patterns from aftersales parts suppliers, original equipment service parts suppliers, original equipment manufacturers parts suppliers, and tier automakers. This paper finds that distribution and delivery services hold the highest percentage of outsourced services among manufacturers.
[82] A cluster concentration typology for making location decisions	Researching the company’s capabilities and competitive advantages	This study aims to examine location decisions from a macro perspective and utilize the findings for typology development	The resulting typology of cluster concentrations is based on four constructs identified in the literature: business innovation, specialization, complementarity, and knowledge transfer. This typology can serve as an aid in making these critical location decisions for practitioners as well as identifying future research topics for academics.
[83] 4th party logistics service providers and industrial cluster competitiveness: Collaborative operational capabilities framework	Researching the capabilities of tourist villages and their relationship to competitive advantage	The case study in this research is the service provider	The results show that total integration between 4PL and industrial clusters has not realized the potential for creativity business innovation and supply chain flexibility and they lack a competitive advantage when competing with other competitors.
Operational Capability—Sustainable Tourism Development
[84] Assessing Tourism Development from Sen’s Capability Approach	Examining the relationship between tourism village capability and smart sustainable tourism village	The research was conducted in Nicaragua and Costa Rica	The findings show that the capabilities of individuals and organizations can increase their ability to run a tourism business.
[16] Exploring the relationship between tourism and poverty using the capability approach	Examining the relationship between tourism village capability and smart sustainable tourism village	The research measures how capabilities can help society prosper	The findings show that participants appreciate the opportunities associated with monetary and non-monetary tourism resources and these opportunities help them achieve various aspects of well-being.
[17] Dynamic capability building and social upgrading in tourism—potentials and limits of sustainability standards	Examining the relationship between tourism village capability and smart sustainable tourism village	Integration using Global Value Chain (GVC)	The findings in this study are that the existence of the tourism village capability has a positive impact on the sustainability of the tourism business.
Competitiveness—Sustainable Tourism Development
[85] Sustainable Tourism of Destination, Imperative Triangle Among: Competitiveness, Effective Management, and Proper Financing	Examining the relationship between smart sustainable tourism village and competitive advantage	The dimension that is linked is with effective management and proper finance	The findings in this research aim to ensure that the competitive advantage of tourism products and services must be based on quality management; it becomes a way to ensure competitive advantage and, therefore, business market credibility.
[86] The significance of environmental values for destination competitiveness and sustainable tourism strategy making: insights from Australia’s Great Barrier Reef World Heritage Area	Examining the relationship between the implementation of smart sustainable tourism village and competitive advantage	Another dimension that is measured is strategy making	The study found that visitors respond more negatively to the prospect of environmental degradation than to the prospect of a 20% increase in local prices; the detailed impact, however, depends on location and visitor mix. Clear seas, healthy coral reefs, healthy reef fish, and less trash are the four most important values.
Innovation—Performance
[87] Relationship between innovation and performance: impact of competitive intensity and organizational slack	Researching the relationship between innovation and performance on competitive intensity and organizational flexibility	The object of research is micro, small, and medium enterprises in Bogota, Colombia	Organizational slack and competitive advantage are relevant strategies to increase innovation and have a positive effect on organizational performance.
[88] Mohammad, I. N., Massie, J. D. D., and Tumewu. F, J. (2019). The effect of entrepreneurial orientation and innovation capability towards firm performances in small and medium enterprises	Examining the effect of operational capability and innovation capacity on company performance	The object of research is micro, small, and medium enterprises in Manado, North Sulawesi	Operational capability and innovation capability have a positive impact on company performance.
[53] The effect of entrepreneurial orientation, customer orientation, and knowledge sharing on innovation capability and business performance	Examining the effects of operational capabilities, customer orientation, and knowledge sharing on innovation capabilities and business performance	The object of research is micro, small, and medium enterprises (MSMEs) in the tourism sector in Banyuwangi Regency	This research proves that MSMEs related to the tourism sector in Banyuwangi must have a business concept, high creativity, be driven to take risks, be competitively aggressive, and be able to identify market opportunities to be competitively superior. MSMEs in the tourism sector in Banyuwangi must maintain their tourism village capabilities so they can continue to innovate in business.
[54] The role of coaching, capability, and innovation on the performance of SMEs in the Kenjeran Tourism Area in Surabaya	The role of training, capability, and innovation on performance	The object of this research is MSMEs in the tourist area of Kenje-ran, Surabaya	The results of the study show that business innovation influences the effect of capability on performance. Coaching, as an antecedent of capability, has a central role in improving the performance of MSMEs. The implication is that the government’s role in formulating coaching policies is needed to improve the performance of MSMEs in the economic development of tourism areas.
[89] To be or not to be digital, that is the question: Firm innovation and performance	Examining the relationship between organizational innovation and organizational performance	The objects of this research are digital and non-digital companies	This study shows that the profiling of entrepreneurs and managers and these leaders’ adoption of new digital processes contribute to a company’s greater competitive advantage.
Innovation—Competitiveness
[90] Global–local trajectories for regional competitiveness: Tourism innovation in the Western Cape	Researching the relationship between innovation and competitive advantage	The object of this research is the manager of tourist destinations in the Western Cape	The results of the investigation indicate a critical need for regional policies to focus on linking strategic networks to access global knowledge, as well as the need to develop tourism as a core regional competency and to strengthen the capacity of local institutions for regional business innovation, excellence competitiveness and economic growth in the Western Cape.
[91] Innovation and competitiveness in the context of the Bulgarian tourism industry	Research on the relationship between innovation and competitive advantage	The object of this research is the tourism industry in Bulgaria	Tourism development in Bulgaria must be based on business innovation, including the categories of product development, process management, and the internal or external relations of the organization.
[92] Competitiveness and innovativeness in the attractiveness of a tourist destination case study—tourist destination Oltenia	Examining the relationship between competitive advantage and innovation on the attractiveness of tourist destinations	The object of this research is a tourist destination in Oltenia	Conjunction conditions encourage environments that limit or affect competitive advantage in tourist destinations.
[93] Entrepreneurship, innovation and competitiveness: what is the connection?	Researches the relationship between entrepreneurship, innovation, and competitive advantage	This research covers many countries	The results show how the importance associated with entrepreneurship depends on the stage of economic development and can consequently reflect a positive or negative impact on these same strategies of economic growth.
Innovation—Performance
[94] Tourism competitiveness and tourism sector performance: Empirical insights from new data	Examining the relationship between competitive advantage and performance in the tourism sector	The object of this research is all companies in the tourism sector	This study suggests that, for countries around the world to promote the performance of the tourism sector, policymakers and stakeholders in the travel and tourism industry must pay sufficient attention to the improvement of TC and factor in the multidimensional nature of the relationship between TC and tourism performance within their policy framework. Provides appropriate policy recommendations for each region and country’s income group.
[95] Tourism destination competitiveness and tourism performance	Examining the relationship between the competitive advantage of tourist destinations and performance	The objects of this research are several countries in the world	This study confirms that core resources, complementary conditions, globalization, and tourism prices significantly explain tourism performance. The results show differences in the levels of competitive advantage and actual performance between countries, highlighting the specific limitations of the current TDC model and the reliability of the TTCI report.
[96] CSR Strategy in Technology Companies: Its Influence on Performance, Competitiveness and Sustainability	The influence of CSR strategy on company performance, competitive advantage, and sustainability	The object of this research is a company in the Science Technology Park in Spain	The results of the study show that CSR-oriented strategies make a significant contribution to organizational performance. In addition, CSR affects the competitive advantage of technology companies and, in particular, their sustainability.
Competitiveness—Capability—Performance—Excellence
[97] Pengaruh Kompetensi dan Kapabilitas Terhadap Keunggulan Kompetitif dan Kinerja Perusahaan	Excellence, capability, excellence, and performance	The unit of analysis is an accommodation company, not a tourist village	Competence and capability have a partially significant effect on competitive advantage. Competence, capability, and competitive advantage have a partially significant effect on company performance.
[98] Inovasi Organisasi dan Kinerja Organisasi: Studi Kasus dan Pusat Kajian dan pendidikan dan Pelatihan Aparatur III Lembaga Administrasi Negara	Innovation (technology, administration, and strategy) and organizational performance	The unit of analysis is Apparatus III of the State Administration Agency	Technology, administration, and strategy have a partially significant effect on company performance.
[99] Pengaruh Strategi Inovasi Terhadap Keunggulan Bersaing di Industri Kreatif (Studi Kasus UMKM Bidang Kerajinan Tangan di Kota Bandung)	Innovation and competitive advantage	The unit of analysis is MSMEs in the field of handicrafts in the city of Bandung	Business innovation has a significant effect on competitive advantage.

, below.

In the goodness of fit test of the initial model, the chi-square, probability, degree of freedom, GFI, CFI, AGFI, TLI, CMIN/DF, and RMSEA values scored poorly because they did not match the existing criteria so they could not proceed to the next stage. Thus, it was necessary to modify the research model and several indicators were removed, including TVC1, TVC2, TVC3, TVC4, TVC6, TVC8, TVC9, BI1, BI2, BI3, BI5, BI7, BI8, BI10, CA1, CA2, CA3, CA4, CA5, CA7, CA8, CA9, CA11, CA12, SSTV1, SSTV3, SSTV4, SST5, SSTV7, SSTV8, SSTV9, SSTV12, TVMP1, TVMP2, TVMP3, TVMP4, TVMP5, TVMP6, TVMP7, TVMP8, TVMP10, and TVMP12. After modifying the model based on the index issued by the AMOS 24 program, the goodness of fit was better than before. The researcher estimated the correlation relationship based on the modified index output. The results of the goodness of fit test after modification can be seen in the final SEM model (Figure 2).

The AMOS 24 output results obtained the full model SEM diagram shown in Figure 2; then, testing of the feasibility of the full model SEM was carried out. From the path diagram in Figure 2, it can be seen that the full model SEM has good goodness of fit because the probability value of the chi-square being ≥0.05 is 0.190. Likewise, the degree of freedom, GFI, CFI, AGFI, TLI, CMIN/DF, and RMSEA values met the recommended values. The results of the full model SEM test are summarized in more detail in

Table 2. Validity and reliability test results.

Variable	Item	r-Count	r-Table	Explanation
Tourism Village Capability	1	0.482	0.3	Valid
	2	0.309	0.3	Valid
	3	0.571	0.3	Valid
Business Innovation	1	0.667	0.3	Valid
	2	0.586	0.3	Valid
	3	0.574	0.3	Valid
Competitive Advantage	1	0.557	0.3	Valid
	2	0.470	0.3	Valid
	3	0.629	0.3	Valid
	4	0.383	0.3	Valid
Smart Sustainable Tourism Village	1	0.718	0.3	Valid
	2	0.606	0.3	Valid
	3	0.719	0.3	Valid
	4	0.734	0.3	Valid
Tourism Village Management Performance	1	0.492	0.3	Valid
	2	0.681	0.3	Valid
	3	0.706	0.3	Valid
	4	0.686	0.3	Valid

,

Table 3. Results of testing the early model SEM.

No	Goodness of Fit Index	Cut-off Value	Results	Criteria
1	χ2—Chi-Square	Expected small	5562.167	Bad fit
2	Significance Probability	≥0.05	0.000
3	Degree of Freedom	>0	1422	Bad fit
4	GFI	≥0.90	0.625	Bad fit
5	CFI	≥0.90	0.736	Bad fit
6	AGFI	≥0.90	0.594	Bad fit
7	TLI	≥0.90	0.724	Bad fit
8	CMIN/DF	≤2.0	3.912	Bad fit
9	RMSEA	≤0.08	0.090	Bad fit

and

Table 4. Full model of structural equation modeling (SEM).

No	Goodness of Fit Index	Cut off Value	Results	Criteria
1	χ2—Chi-Square	Expected Small	64,031	Good fit
2	Significance Probability	≥0.05	0.190
3	Degree of Freedom	>0	55	Good fit
4	GFI	≥0.90	0.974	Good fit
5	CFI	≥0.90	0.996	Good fit
6	AGFI	≥0.90	0.957	Good fit
7	TLI	≥0.90	0.994	Good fit
8	CMIN/DF	≤2.0	1.164	Good fit
9	RMSEA	≤0.08	0.021	Good fit

.

Table 2 presents the results of the values obtained in this study that were declared feasible for hypothesis testing; thus, the model proposed in this study is acceptable.

Construct Reliability and Average Variance Extracted: in order to be accepted, the cut-off value of the construct reliability test must be >0.70. However, if the nature of the research is explanatory, then a value under 0.7 can still be accepted. The recommended cut-off value of the average variance extracted test is >0.50. An average extracted variance (AVE) value of >0.50 indicates that the amount of variance of the indicators extracted by the latent construct is bigger than the error variance. The results of the construct reliability and variance extracted re-specification models can be seen in

Table 5. Construct reliability and average variance extracted.

No.	Variable	Indicator	Standard Loading	Standard Loading2	Measurement Error (1-Standard Loading2)	Construct Reliability	Average Variance Extracted
1	Tourism Village Capability	TVC5	0.746	0.557	0.443	0.719	0.561
		TVC7	0.752	0.566	0.434
		∑	1.498	1.122	0.878
		∑2	2.244
2	Business Innovation	BI4	0.768	0.590	0.410	0.800	0.571
		BI6	0.791	0.626	0.374
		BI9	0.706	0.498	0.502
		∑	2.265	1.714	1.286
		∑2	5.130
3	Competitive Advantage	CA6	0.785	0.616	0.384	0.705	0.545
		CA10	0.689	0.475	0.525
		∑	1.474	1.091	0.909
		∑2	2.173
4	Smart Sustainable Tourism Village	SSTV2	0.743	0.552	0.448	0.798	0.590
		SSTV6	0.616	0.379	0.621
		SSTV10	0.810	0.656	0.344
		SSTV11	0.773	0.773	0.773
		∑	2.942	2.361	2.185
		∑2	8.655
5	Tourism Village Management Performance	TVMP9	0.773	0.598	0.402	0.744	0.592
		TVMP11	0.766	0.587	0.413
		∑	1.539	1.184	0.816
		∑2	2.369

.

4.5. Hypothesis Testing

Hypothesis testing is used to determine whether or not the exogenous variables influence the endogenous variables. The relationship between the constructs in the hypothesis can be seen from the regression weight value or the research hypothesis in

Table 6. Research hypotheses.

Hypotheses				Estimate	S.E.	C.R.	p	Label
H1	Smart Sustainable Tourism Village	←	Business Innovation	0.326	0.117	2.778	0.005	Accepted
H2	Smart Sustainable Tourism Village	←	Competitive Advantage	0.267	0.172	1.555	0.120	Not Accepted
H3	Smart Sustainable Tourism Village	←	Tourism Village Capability	0.574	0.246	2.331	0.020	Accepted
H4	Tourism Village Management Performance	←	Competitive Advantage	0.662	0.177	3.525	***	Accepted
H5	Tourism Village Management Performance	←	Tourism Village Capability	0.260	0.171	1.519	0.129	Not Accepted
H6	Tourism Village Management Performance	←	Smart Sustainable Tourism Village	−0.425	0.293	−1.452	0.146	Accepted
H7	Tourism Village Management Performance	←	Business Innovation	0.260	0.121	2.153	0.031	Accepted

p value = *** which means it is almost close to 0, or it can be said to have a very significant relationship.

, below.

Table 6 shows the results of the hypothesis testing. A hypothesis is accepted when the probability value is less than 0.05 and the absolute critical ratio (C.R.) value is more than 1.967. Of the seven hypotheses tested, four are accepted and have a significant effect, namely, H1, H3, H4, and H7, while H2, H5, and H6 are rejected and have no significant effect. The accepted hypotheses explain that the exogenous variables affect the endogenous variables. The test criterion is to reject H0 if the t-value or critical ratio (C.R.) is ≥1.967 or the p-value is ≤0.05.

Business Innovation Influences Smart Sustainable Tourism Village: The results show a t-value or C.R. of 2.778 (≥1.967) and a p-value of 0.005 (≤0.05) so H1 is accepted, meaning that business innovation has a positive and significant effect on the smart sustainable tourism village. The results of this study support previous research with similar findings indicating that innovation influences sustainable tourism [100,101]. One of the goals of innovation is to create new conveniences for human life through inventions or new developments from innovative ideas that have been successfully realized. Tourism is one of the activities most urgently in need of innovation to “keep the boom going” and to better understand how mature destinations and tourism managers devise innovative daily practice solutions [102].

Competitive Advantage Influences Smart Sustainable Tourism Villages: The results show a t-value or C.R. of 2.331 (≥1.967) and a p-value of 0.020 (≤0.05); thus, H3 is accepted, meaning that business competitive advantage has a positive and significant effect on smart sustainable tourism villages. Competitive advantage was first introduced as a concept in 1985 by Porter in his writing entitled “Competitive Advantage: Creating and Sustaining Superior Performance”. Competitive advantage can be described as the heart of a company’s performance in a competitive market. Competitive advantage is about how a company puts generic strategies into practice. The competitiveness of tourism begins with the statement that the experience that the tourist acquires in the tourist destination is a fundamental product of tourism. There is competitiveness between enterprises in terms of the products they provide in the area of tourism (organizers of travel, hotel, transport, and other tourist services) but this kind of competitiveness arises from the options available and depends on the choices made by tourists regarding alternative tourist destinations [103]. Sustainable tourism considers cooperation between tourist companies, tourist destinations and nationalities, and regional and local authorities to cope with a wide group of challenges and to remain competitive at the same time.

The results of this study support previous research that found the same results indicating that competitive advantage influences smart sustainable tourism [104]. However, in improving competitiveness and smart sustainability, it is better to focus on improving existing weaknesses, such as the division of the main tasks and functions of managers, increasing the quantity and quality of training for managers, and improving infrastructure, especially related to transportation.

Smart Sustainable Tourism Villages Influence Tourism Village Management Performance: The results show that if there is a t-value or C.R. of 3.306 (≥1.967) or there is a *** sign in the p-value, then H6 is accepted; thus, it can be concluded that the smart sustainable tourism village has a positive and significant sustainable effect on tourism village management performance. The development approach to realizing a sustainable tourism village involves community participation through the public investment approach. Here, the village economy is developed through community participation in both financing and management to become an independent tourist village. The institutional and human resources approach is used to strengthen the government and related agencies as well as human resources in managing villages and is explained by the information technology development approach to improve service quality, transparency, and accountability, and facilitate the introduction of tourist villages to the world. The development of these three approaches has resulted in leadership that is close to the community, innovative, collaborative, and exhibits good governance so that a sustainable tourism village can be achieved. The results of this study support previous research [105] that also found that tourism village capability influences smart sustainable tourism villages.

Business Innovation Influences Tourism Village Management Performance: The results show that if there is a t-value or C.R. of 2.535 (≥1.967) or a p-value of 0.011 (≤0.05), then H7 is accepted; thus, it can be concluded that business innovation has a positive and significant effect on tourism village capability. Innovation is an important part of competition because it can bring advantages to tourism villages through the creation of new ideas, new processes, and new products, or by improving current business conditions. These advantages can mean increases in productivity, efficiency, sales, and employment (labor). Nonetheless, innovation can be a very risky endeavor. Innovation management is needed to reduce this risk by continually monitoring innovation activities and processes and ensuring that innovation can be successful [106]. The results of this study support previous research conducted by Pundziene et al. [107], which found that tourism village capability influences smart sustainable tourism villages.

Direct Influence, Indirect Influence, and Total Influence: Influence analysis is used to determine how strong the influence of a variable is on other variables either directly or indirectly and in total/overall. The interpretation of these results is important in determining a clear strategy to improve performance. The results from the calculation of the direct, indirect, and total effects using AMOS 24 are presented in

Table 7. Direct influence, indirect influence, and total influence.

			Standardized Direct Effects	Standardized Indirect Effects	Standardized Total Effects
Competitive Advantage	→	Smart Sustainable Tourism Village	0.433		0.433
Competitive Advantage	→	Tourism Village Management Performance	−0.379	0.318	−0.061
Business Innovation	→	Smart Sustainable Tourism Village	0.270		0.270
Business Innovation	→	Tourism Village Management Performance	0.255	0.199	0.454
Tourism Village Capability	→	Smart Sustainable Tourism Village	0.270		0.270
Tourism Village Capability	→	Tourism Village Management Performance	0.311	0.199	0.510
Smart Sustainable Tourism Village	→	Tourism Village Management Performance	0.736		0.736

.

Based on Table 7, a direct and indirect influence model diagram can be created, as shown in Figure 3.

Based on the calculation results in Table 7 and Figure 3 above regarding the direct effect of competitive advantage, business innovation, and tourism capability on smart sustainability, it can be concluded that competitive advantage has the greatest direct influence on smart sustainability (by 0.433) whem compared to the direct effects of business innovation (by 0.270) and tourism capability (0.270). As for the direct effects of competitive advantage, business innovation, tourism capability, and smart sustainability on management performance, it can be concluded that smart sustainability has the greatest influence on management performance (by 0.736) when compared to the direct effects of competitive advantage (by −0.379), tourism capability (by 0.311), and business innovation (by 0.255).

The indirect effect of competitive advantage, business innovation, and tourism capability on management performance through smart sustainability shows that competitive advantage has a greater indirect effect (by 0.318) than business innovation (by 0.199) and tourism capability (by 0.199). Because the direct effect of competitive advantage on management performance (by −0.379) is smaller than the indirect effect of competitive advantage on management performance through smart sustainability (by 0.318), the direct effect of business innovation on management performance (by 0.255) is greater than the indirect effect of business innovation on management performance through smart sustainability (by 0.199) and the direct effect of tourism capability on management performance (by 0.311) is greater than the indirect effect of tourism capability on management performance through smart sustainability (by 0.199). Thus, it can be concluded that smart sustainability is an intervening variable in this study.

Table 7 shows the results of calculating the total effect of competitive advantage, business innovation, and tourism capability on smart sustainability and indicates that competitive advantage has the greatest total effect (0.433) on smart sustainability when compared to the total effects of business innovation (0.270) and tourism capability (0.270). The results of calculating the total effect of competitive advantage, business innovation, tourism capability, and smart sustainability on management performance show that smart sustainability has the greatest total effect (0.736) compared to the total effects of tourism capability (0.510), business innovation (0.199), and competitive advantage (−0.061).

5. Discussion

According to various aspects and criteria, the data prove that the arithmetic mean resulting from the research unit is in good condition or produces a score of 4. This indicates that there is strong effort and motivation from the tourism village managers in the independent category in developing tourist villages, in terms of capabilities, business innovation, competitive advantage, and the application of smart sustainability in the tourism village, which has implications for the performance of tourism village management. In addition, regulations and policies from the government also play an important role in supporting the harmonious rhythm of the development of independent tourism villages so that they can exist and be competitive in the midst of an increasingly complex tourism market. Even though the arithmetic mean produced a score that is classified as high, it is also necessary to remind every manager of an independent tourism village that they must not be completely negligent in adapting to the changing times or trends. Innovation in tourist attractions, accompanied by innovation in creating a marketing chain, must still be carried out and evaluated regularly. This is not only important for maintaining the harmony and sustainability of the development of tourist villages but is also important for maintaining the balance of tourism resources, which are sensitive to various issues of natural and cultural exploitation.

The SEM analysis using AMOS shows that tourism village capability influences smart sustainable tourism villages (by 0.360). This is the largest value compared to the path coefficients of the other variables. Capability is the level of ability, competency, and expertise of individuals, organizations, and communities to implement various functions, manage situations collectively, solve various problems, and design or identify goals to be achieved [86,87]. Research conducted by Franzoni (2015) showed that capability has a positive and significant influence on sustainable tourism, meaning that it periodically pays attention to the environment to identify opportunities for tourism development, reviews the possible impacts of changes in the environment for tourism village businesses, and implements ideas to mutually enhance existing tourism villages to be able to create sustainable performance and progress in social sciences, education, and humanities [107].

The smart sustainable tourism village has an influence on tourism village management performance (by 0.073). Prameka et al. (2021) said that a sustainable business approach can influence business management performance [105]. Ardika (2007) stated that sustainable tourism development should meet the needs of tourists, the tourism industry, and local communities without compromising the ability of future generations to meet their own needs [108]. Thus, it can be clarified that in the development of a smart sustainable tourism village, its objectives must adhere to three basic principles, namely, (1) ecological sustainability, (2) socio-cultural sustainability, and (3) economic sustainability. Its development should meet the needs of the present without compromising the ability of future generations to meet their needs. Meanwhile, business innovation has an effect on tourism village management performance (by 0.443). Pundziene et al. (2021) said that knowledge has a significant effect on company performance [106]. Business innovation is defined as the development and implementation of new ideas. In this case, business innovation is the construction of not only new ideas but also behavior [109,110]. Therefore, business innovation often refers to certain behaviors related to creation and development, driven by changes that lead to the exploration of new opportunities or exploitation of current strengths [111,112].

To build a tourism village, one important aspect that needs to be considered is its capability. The theory of the capability of a tourism village is an approach used to analyze and develop the potential of the village to create competitiveness and sustainability. This theory emphasizes the importance of understanding and utilizing the unique resources and advantages possessed by a tourist village as a basis for sustainable tourism development. The theory of the capability of a tourist village focuses on building the capability or ability of a tourist village to manage and utilize existing natural, cultural, and human resources. This involves developing the skills, knowledge, and management systems necessary to optimize the village’s tourism potential [113,114]. Strambach and Surmeier (2013) said that tourism capabilities are needed to improve working conditions in the tourism sector [115]. In previous research, Pranita (2016) revealed that in building sustainability capabilities and strategies to increase the competitive advantage of marine tourism, several important aspects need to be optimized, including (1) strengthening awareness in pioneering tourism’s potential development, (2) strengthening knowledge about the concept of a tourism village capable of serving tourists, (3) developing the ability to process souvenirs, and (4) developing the ability to manage tourist attractions [116].

In this case, the author tries to provide a new perspective on the theory of tourism village capabilities by strengthening (1) operational capabilities, (2) dynamic capabilities, and (3) digital capabilities. Operational capability relates to the skills of a tourist village to lead an organization that is equipped with standard operational procedures for tourism services. In addition, the management of a tourist village must also be able to devise concepts according to the tourism potential it has. This theory also recognizes the importance of local community participation in the development of tourist villages. In this context, local communities are empowered by being involved in decision making, sharing economic benefits, and preserving local culture. Through the application of tourism village capability theory, it is hoped that tourist villages can optimize their potential to improve the welfare of local communities, maintain environmental sustainability, and increase tourist attractions for visitors. Based on the analysis in the field, the tourism village of Nglanggeran is an example of best practice in developing operational capabilities, dynamic capabilities, and digital capabilities. This is evidenced by the village’s receipt of several awards in the last 5 years, including the Winner of the Best ASEAN tourism village with the 2017 CBT concept, the Winner of the 2018 ASEAN Sustainable Tourism Award, and the 2021 Sustainable Tourism Village Award. This achievement is due to the cohesiveness and love of the village community for maintaining its various tourism potentials. In addition, the cohesiveness of the Nglanggeran community is reflected in the fact that the village manager always encourages the youth to be proactively involved in the development of tourist attractions.

Furthermore, in the context of business innovation, Van de Ven (1986) explained that business innovation is the development and implementation of new ideas by individuals who, over time, participate in transactions with other people in an institutional setting [117]. In this regard, different studies have recognized business innovation as a new construct, not only in terms of ideas but also behaviors [110,111]. Therefore, business innovation often refers to certain behaviors related to creation and development, driven by changes that lead to the exploration of new opportunities or exploiting current strengths [111,112,113]. Business innovation is increasingly considered a key success factor in tourism development and destination management. “Business innovation is often seen as one of how businesses can strive to gain a competitive advantage, especially where business innovation in the face of competition leads to growth, survival or increased profitability” [118].

In contemporary tourism, where services and experiences are performed rather than produced, are inseparable from consumption, cannot be stored, cannot be owned, are complex, and are difficult to measure regarding quality, one can note the shift from materialism to something that can be measured, called “experimentalism” [118]. Business innovation is an integral part of the tourism experience; however, “Business Innovation” only deserves 10 lines in the Tourism Encyclopedia [18]. In this study, the authors try to initiate and elaborate on the theory of business innovation in tourism villages, namely, by establishing three important criteria: (1) organizational innovation, (2) marketing innovation, and (3) product innovation. Organizational innovation places more emphasis on the organizational structure of a tourist village capable of supporting teamwork, accompanied by relevant human resource qualifications to carry out their duties and work properly and correctly. In terms of marketing innovation, managers must be able to update their marketing products by utilizing digital platforms and discount schemes and building partnerships with stakeholders, including government, private, and potential rural tourism consumers. The last criterion is product innovation, where tourism village managers are required to be able to develop tourism products and attractions by emphasizing “the power of the program” in a sustainable manner. This means that the various tourism products that are developed are not only trend-oriented but must be oriented towards strengths that support aspects of resource sustainability and respect for the cultural conservation of tourist villages.

In the tourism context, competitive advantage has a crucial role for stakeholders to increase market share [118]. Competitive advantage is defined as the ability to increase expenditure on tourism, find ways to attract visitors, provide memorable and satisfying experiences with a profitable business approach, and improve the welfare of local communities, as well as maintaining the natural capital assets of the destination for the benefit of future generations [70]. The destination’s competitive advantage is also translated as its ability to maintain or improve its position in the market [116]. The following are some definitions of competitive advantage. In their research, Dwyer and Kim (2003) revealed that the important dimensions and determinants used to measure the advantages of destination competitiveness are (1) supporting factors and resources; (2) core resources; (3) destination management; and (4) situational conditions and market performance [119]. Meanwhile, the World Economic Forum (2007) revealed that the dimensions for measuring tourism competitiveness include (1) government policy; (2) business environment and the economy; (3) human resources; (4) cultural resources; and (5) natural resources [120].

In general, the approach to evaluating competitive advantage described by Dwyer and Kim (2003) and the World Economic Forum (2007) is good and quite comprehensive but the basic thing that needs to be understood is its relevance to the current era as no dimension relates to the development of technology or the use of ICT [119,120]. Therefore, the authors in this study attempt to devise four dimensions that can be used to evaluate the competitive advantage of tourist villages: (1) tourism resources, (2) infrastructure, (3) environmental consideration, and (4) information technology readiness. Optimizing the development of ICT readiness is not only important for monitoring the reliability of the electricity supply and 4G/5G internet signals in tourist village areas but is also important for the use of electronic transactions and digital marketing to increase tourist visits.

The development of increasingly advanced technology has resulted in intense competition in the tourism sector. The application of the smart tourism village model is relatively new and has not been optimally implemented compared to the smart city concept. Hardy et al. (2002) stated that the development of a tourist village using the smart tourism village model is a solution for the development of a village as the application of this model can lead to quality tourism activities that can have an impact on increasing community welfare and competitiveness and can lead to the principle of sustainability in tourism development [121]. The principles of developing a smart sustainable tourism village are (1) maintaining environmental quality; (2) providing benefits for local communities and tourists; (3) maintaining the relationship between tourism and the environment; (4) maintaining harmony between local communities, tourist needs, and the environment; (5) creating dynamic conditions adapted to carrying capacity; and (6) ensuring all stakeholders work together based on the same mission to realize sustainable development [121].

Meanwhile, Setijawan (2018) said that the principles of developing a smart sustainable tourism village are (1) creating jobs and alleviating poverty; (2) involving local communities; (3) being able to improve human resources; (4) being able to promote more active empowerment; and (5) the existence of joint ventures or partnerships between the government, community organizations, and the private sector for stronger and more effective development [122]. Furthermore, Widiati and Permatasari (2022) outlined that the strategy for creating a smart sustainable tourism village is to hold to the principles of religious and cultural values and be able to preserve the environment [123]. The implementation of the smart sustainable tourism village was measured with several elements that were almost the same, namely, facility design, employee development, marketing strategy, community development, and supply chain efforts. Based on some of the previous studies, the construct for measuring the implementation of sustainable tourism is the extent to which the implementation of sustainable tourism has been carried out in tourist villages [122].

The literature has shown elements related to smart sustainable tourism villages, including, among others, those from the Global Sustainable Tourism Council (2013), that measure how sustainable tourism is carried out by collaborating several dimensions, including sustainable management practices, maximizing social and economic benefits, maximizing cultural benefits, and maximizing environmental benefits [103]. The dimensions and indicators added and adjusted in the smart sustainable tourism village variable are indicators of waste management following circular economy principles, namely, regenerative and restorative [104]. Then, the dimensions of smart tourism are taken from the Ambience Intelligence Tourism approach [105] and used by hotel managers and destination managers, such as those in tourist villages. From the various theories regarding smart sustainable tourism villages, there are at least five dimensions that need to be considered in optimizing smart sustainable tourism villages, namely, (1) e-tourism, (2) sustainable management, (3) a circular economy, (4) a smart economy, and (5) smart destinations (see Figure 4).

The model above can be considered for strengthening the development of tourist villages in Java in particular and in Indonesia in general. The dimensions of competitive advantage, tourism village capability, and business innovation can be used as benchmarks to evaluate the success of a smart sustainable tourism village. The success of such a village can also be seen from the existence of e-tourism, sustainable management, a circular economy, a smart economy, and smart destinations. In the context of e-tourism, it can be said that various tourist villages categorized as independent have adopted the use of digital platforms. Tourists can access independent tourist villages using mobile devices, the IoT, or existing tourist village applications. Meanwhile, in terms of sustainable management, the various independent tourist villages are obliged to adopt applicable regulations and legal regulations accompanied by legal aspects of land use. This is very important to minimize the potential for land disputes or conflicts over the dynamics of land ownership occupations in tourist village areas.

In terms of a circular economy, tourist villages must also adopt the reduce, reuse, and recycle principles as a mandate from sustainable development policies. The practice of a circular economy must also emphasize the protection of sites and local cultural heritage as this approach is practiced by the people of the Nglanggeran tourism village. The existence of an ancient volcano, which is part of the Gunung Sewu geopark, makes Nglanggeran a complete package tourism village that has geo-tourism attractions (as a hard tourism element) and rice fields (as a soft tourism element), which can support ecotourism conservation. After optimizing the development of a smart sustainable tourism village, it is hoped that, in the end, various advanced categories of tourism villages will be able to achieve various distributions of benefits. The distribution of the benefits in question relates to performance management, including (1) financial growth; (2) customer satisfaction; (3) the establishment of healthy and sustainable internal business processes; and (4) an increase in learning motivation and growth from tourism village communities to create a healthy, integrated, and sustainable tourism village management climate.

6. Conclusions, Implications, and Limitations

6.1. Conclusions

According to various aspects and criteria, the data prove that the arithmetic mean resulting from the research unit is in good condition or produces a score of 4. This indicates that there is strong effort and motivation from the tourism village managers in the independent category in developing tourist villages in terms of capabilities, business innovation, competitive advantage, and the application of smart sustainability in the tourism village, which has implications for the performance of tourism village management. In addition, national and local regulations from the government also play an important role in supporting the harmonious rhythm of the development of independent tourism villages so that they can exist and be competitive in the midst of an increasingly complex tourism market. Based on the AMOS SEM software, the data show that the results of the hypothesis testing indicated a probability value of less than 0.05 and an absolute critical ratio (C.R.) value of more than 1.967; thus, of the seven hypotheses tested, three hypotheses were accepted and had a significant influence, namely, H3, H6, and H7, while H1, H2, H4, and H5 were rejected and had no significant effect. The accepted hypotheses explain that the exogenous variables affect the endogenous variables. The test criterion is to reject H0 if the t-value or critical ratio (C.R.) is ≥1.967 or the p-value is ≤0.05.

6.2. Implications

The management of an independent tourism village needs to pay attention to the development of strong capabilities and the ability to innovate in the tourism business and must create competitive advantages that differentiate their tourist village from other destinations. In addition, the concept of a smart sustainable tourism village can increase competitive advantage, attract more tourists, increase income, and contribute to local economic development. The application of the smart sustainable tourism village concept is the key to success in achieving good performance in the management of tourist villages on the island of Java. The implication is that the government, tourism village managers, and related stakeholders need to work together to increase capabilities, encourage business innovation, and create competitive advantages to develop a fully sustainable and independent tourism village. For further development in the field, it is advisable to carry out further research using a larger sample and in locations other than Java Island. The research will be further improved if it is carried out on other islands in Indonesia or even conducted nationally in order to determine the performance of the management of independent tourism villages as a whole in Indonesia.

6.3. Limitations

In this study, questionnaires were sent to twelve tourism villages on Java Island categorized as independent, advanced, and in-progress. So, the main limitations of this study are its geographical factor and sample size. Nevertheless, our study could be used as a benchmark for tourism village stakeholders to avoid disorganization and uncertainty in crises. Future research could focus on other tourism villages/destinations that are newly established and need to stabilize their business.