Sustaining Infrastructure Firm Performance Through Strategic Orientation: Competitive Advantage in Dynamic Environments

Abstract

Indonesia’s pursuit of the Indonesia Emas 2045 vision emphasizes sustainable economic growth and equitable prosperity, with strategic initiatives such as establishing a new national capital and enhancing infrastructure to bolster economic competitiveness. This study examines the relationship between Strategic Orientation and Sustainable Firm Performance, with Firm Competitive Advantage as a mediator and Dynamic Environment as a moderator. Using data collected from 474 private companies affiliated with the Indonesian Chamber of Commerce and Industry between September and December 2024, and analyzed via Structural Equation Modeling with SmartPLS4, the findings demonstrate that Strategic Orientation significantly enhances Firm Competitive Advantage, which partially mediates its impact on Sustainable Firm Performance. Moreover, Dynamic Environment amplifies the Strategic Orientation–Firm Competitive Advantage relationship. The study contributes to the Resource-Based View and Dynamic Capability Theory, providing actionable insights for private firms to enhance strategic adaptability and for policymakers to foster private sector sustainability amidst market dynamics.

1. Introduction

Indonesia is poised to actualize the ambitious goal of “Indonesia Emas 2045” or Indonesia’s golden centenary, which prioritizes sustainable economic development and equitable prosperity [1]. A key strategy to do this is the establishment of a new national capital (2025–2045) and the execution of multiple national strategic initiatives [2]. Forecasts suggest that government infrastructure initiatives will prevail throughout this era, offering substantial prospects for private sector involvement. The achievement of this objective necessitates strong cooperation among the government, the private sector, and society [3]. Sustainable economic growth is essential for realizing this vision in developing countries. Sustainable economic growth relies on four primary prerequisites such as equitable development, affordability of education, accessibility of healthcare services, and availability of employment opportunities [4,5]. The four elements are interrelated, so that interruption in one might result in unsustainable development.

Infrastructure development has emerged as a fundamental pillar to facilitate the transition towards Indonesia Emas 2045. Robust infrastructure not only enhances the movement of goods and services but also fortifies national economic competitiveness [6]. The obstacles encountered arise not solely from the necessity for money and technology but also from external influences, including legislative modifications, economic policies, and market dynamics [7]. Research indicates that governmental rules, economic policies, and market pressures substantially influence the financial security of construction firms in Indonesia [8]. The company’s capacity to adapt to alterations in the external environment is crucial. The business environment in Indonesia is becoming progressively dynamic due to regulatory changes, technological advancements, and market pressures [9]. These alterations not only generate opportunities but also present considerable obstacles for enterprises. In this context, it is essential for companies to cultivate dynamic capacities to adapt, construct, and reconfigure their resources. Rust et al. [10] emphasizes that a firm’s capacity to identify technological trends via industry foresight is crucial for sustaining competitiveness in the face of uncertainty in the business environment. Furthermore, Ghomi et al. [11] assert that firms adept at addressing external challenges by enhancing their competitive edge are more inclined to achieve sustainable performance.

In facing the challenges of an increasingly dynamic business environment, the Indonesian Chamber of Commerce and Industry (KADIN) plays a central role in supporting the private sector’s adaptation to external changes. As the official chamber of commerce, KADIN not only functions as a facilitator in bridging the interests of the government and business actors but also as a provider of strategic resources that help companies develop dynamic capabilities [12]. Through training programs, policy advocacy, and the organization of business forums, KADIN helps companies identify market opportunities, understand regulatory changes, and integrate new technologies into their business strategies. Additionally, KADIN facilitates cross-sector collaboration to create innovative solutions relevant to both local and global challenges [13]. With this function, KADIN becomes a strategic partner that ensures the private sector not only survives amidst business dynamics but also significantly contributes to sustainable national economic development through the achievement of Sustainable Firm Performance (SFP).

This research is based on the Dynamic Capability Theory introduced by Teece, Pisano, and Shuen [14]. This theory explains that dynamic capabilities refer to a company’s ability to integrate, build, and reconfigure internal and external resources to respond to rapid environmental changes. In the context of a dynamic business environment, these capabilities are considered crucial for maintaining competitive advantage [15]. This theory serves as a conceptual foundation in explaining how companies can adapt their strategies amidst the constantly changing external environmental pressures.

Previous research has shown various relationships between the variables in this research model. Zhou et al. [16] found that a dynamic environment strengthens the relationship between Strategic Orientation (SO) (such as Market Orientation (MO), Entrepreneurial Orientation (EO), Organizational Learning (OL)) and Firm Competitive Advantage (FCA), where companies that are responsive to external changes are more capable of achieving competitive advantage. This study differs from Zhou et al. [16] as it not only highlights the role of a dynamic environment as a moderator between Strategic Orientation (SO) and Firm Competitive Advantage (FCA) but also integrates the mediating effect of FCA on Sustainable Firm Performance (SFP) into a comprehensive and holistic model. Additionally, this research is uniquely conducted in the context of private companies in a developing country like Indonesia, operating under KADIN, providing new empirical insights into strategy adaptation in the infrastructure sector amidst market dynamics, which have been underexplored in prior studies.

Jiang et al. [17] added that a Dynamic Environment (DE) can also strengthen the relationship between innovation capabilities and company performance, indicating that flexible strategies are key amidst external challenges. Research by Ferreira et al. [18] revealed that the relationship between company resources and performance becomes stronger in a dynamic environment, especially when the company is able to optimally utilize its resources to respond to the market. Unlike these studies, this research explores how strategic orientation (SO)—encompassing entrepreneurial, market, and learning orientations—interacts with Firm Competitive Advantage (FCA) as a mediating mechanism to achieve Sustainable Firm Performance (SFP), while positioning DE as a moderator within this broader framework. Conducted in the context of private firms in Indonesia’s infrastructure sector, this study captures the complexities of how SO and FCA function dynamically in volatile markets, addressing the critical gap of how firms in developing economies adapt strategic initiatives to sustain competitive advantage and long-term performance amidst external uncertainties.

Additionally, Yu et al. [19] emphasize the direct role of dynamic capabilities on the financial performance of the company, while Rohani et al. [20] highlight the importance of distinguishing between operational and dynamic capabilities to enhance organizational performance. Yahia Marzouk & Jin [21] also emphasizes that adaptive strategies are necessary to effectively utilize the company’s resources amidst external environmental uncertainties. Ojha et al. [22] added a perspective related to the speed of environmental change, where companies must adjust their activities to align with the speed of the environment to maintain competitiveness. This study differs fundamentally by embedding its analysis within the unique socio-economic and institutional context of Indonesia, particularly its infrastructure sector, which faces distinctive challenges such as regulatory volatility, limited resources, and market constraints—conditions rarely explored in prior research. Unlike prior research which often focuses on developed economies or global corporations, this research provides a grounded perspective on how private firms in a developing economy navigate dynamic environments to achieve sustainable performance. Additionally, it aligns its findings with Indonesia’s national vision of “Indonesia Emas 2045”, contributing not only to the theoretical discourse but also offering actionable strategies for businesses operating under conditions of heightened external uncertainty.

Most previous research has only explored the role of the Dynamic Environment as a moderating variable that strengthens the relationship between Strategic Orientation and Firm Competitive Advantage, as a factor influencing Sustainable Firm Performance. However, the complex relationship involving SO, FCA as mediation, and DE as moderation towards SFP has not been extensively researched holistically. Another gap is the research context, which often focuses on multinational companies or specific sectors, thus failing to reflect the dynamics faced by private companies in developing countries like Indonesia. This research aims to fill that gap by examining how strategic orientation affects sustainable firm performance through competitive advantage, while also testing how the dynamic environment as a moderator strengthens the relationship between strategic orientation and competitive advantage. Using the context of private companies associated with the Indonesian Chamber of Commerce and Industry (KADIN) Indonesia organization, this research also provides relevant contextual contributions in understanding strategy adaptation amidst the dynamics of the business environment.

2. Hypothesis Development

2.1. The Relationship Between Strategic Orientation (SO) and Firm Competitive Advantage (FCA)

Strategic Orientation (SO), encompassing Market Orientation (MO), Entrepreneurial Orientation (EO), Organizational Learning (OL), plays a critical role in shaping Firm Competitive Advantage (FCA). First, EO refers to a firm’s strategic posture that embodies its risk-taking, innovative, and proactive tendencies in decision making and strategic actions [23]. EO enables firms to identify and exploit emerging opportunities, adapt to market uncertainties, and innovate in ways that foster differentiation and value creation. These behaviors are especially relevant for private companies in dynamic markets where agility and innovation are vital for sustained competitiveness. Empirical studies have shown that firms with strong EO enhance their intellectual and organizational capital, thus strengthening their competitive position [24].

Second, MO is conceptualized as a firm’s capability to anticipate, understand, and respond to customer needs and market trends. MO encompasses both responsive market orientation, which focuses on addressing current customer demands, and proactive market orientation, which emphasizes anticipating future market opportunities [25]. The dual dimensions of MO are pivotal in driving innovation and aligning resources to enhance FCA. For example, responsive MO allows firms to generate and disseminate market intelligence, while proactive MO focuses on identifying latent customer needs and creating innovative solutions [26]. MO facilitates the development of marketing and innovation capabilities, which are instrumental in sustaining competitive advantage in hypercompetitive and rapidly evolving industries [27]. Furthermore, empirical evidence suggests that firms leveraging MO achieve superior performance by effectively responding to current market demands while anticipating future trends [28].

Third, OL represents the process through which firms acquire, disseminate, and apply knowledge to improve their strategic and operational outcomes [29]. This dynamic capability enables firms to continually refine their strategies and adapt to environmental changes, thus sustaining their competitive advantage. OL enables firms to acquire, assimilate, and apply external knowledge effectively, fostering innovation and resilience [30]. This capability is crucial for adapting to environmental changes and maintaining FCA in volatile markets [31]. Furthermore, OL facilitates a balance between exploitation (refining existing processes) and exploration (pursuing new opportunities), which are essential for both immediate performance and long-term adaptability [32].

Empirical studies consistently show that SO enhances dynamic capabilities, such as sensing, seizing, and reconfiguring resources, which directly influence FCA [33]. For example, firms with strong strategic orientations demonstrate superior ability to innovate, align with market needs, and sustain performance, even in disruptive environments [24,34]. These findings highlight the synergistic effects of SO, which collectively amplify a firm’s ability to adapt, compete, and thrive in competitive markets. Based on this theoretical and empirical foundation, the following hypothesis 1 can be proposed:

Hypothesis 1 (H1). 

Strategic Orientation (SO) positively influences Firm Competitive Advantage (FCA).

2.2. The Relationship Between Firm Competitive Advantage (FCA) and Sustainable Firm Performance (SFP)

Firm Competitive Advantage (FCA) acts as a critical enabler of long-term performance outcomes [35]. FCA, which stems from the possession of unique, valuable, and inimitable resources as highlighted by the Resource-Based View (RBV), provides firms with the ability to differentiate themselves and achieve cost efficiencies, which are essential for sustained competitiveness and performance [36]. Empirical evidence supports the notion that FCA enhances Sustainable Firm Performance (SFP) by fostering resilience and adaptability in response to dynamic environmental changes [37]. Firms with strong FCA not only achieve financial profitability but also deliver broader outcomes, such as social and environmental performance, which are integral to SFP [38,39]. For instance, studies in the manufacturing and hospitality sectors demonstrate that FCA derived from innovation and operational efficiency leads to sustainable competitive advantages that align with long-term stakeholder and environmental goals [40,41]. Moreover, the dynamic capability theory underscores the importance of FCA in enabling firms to adapt to changing market conditions, thereby sustaining performance over time [42]. FCA acts as a mediating factor between strategic initiatives, such as green innovation and business model innovation, and sustainable performance outcomes, facilitating the alignment of organizational goals with broader societal and environmental objectives [43,44]. Based on this theoretical and empirical foundation, the following hypothesis 2 is proposed:

Hypothesis 2 (H2). 

Firm Competitive Advantage positively influences Sustainable Firm Performance.

2.3. Firm Competitive Advantage (FCA) as a Mediator

The role of Firm Competitive Advantage as a mediator in the relationship between SO and SFP lies in its ability to translate the strategic potential of EO, MO, and OL into tangible, sustainable outcomes [45]. From a theoretical perspective, FCA aligns with the Resource-Based View (RBV) and Dynamic Capability Theory, which posit that firms achieve superior performance by developing and leveraging unique, valuable, and inimitable capabilities [46]. FCA is critical because it serves as the mechanism through which the resources and capabilities derived from SO are leveraged to create unique market positions, enabling firms to outperform competitors [47]. This competitive edge is not only about achieving short-term success but also about establishing conditions for long-term sustainability [27].

FCA ensures that the strategic insights and dynamic capabilities developed through Strategic Orientation are effectively utilized to foster innovation, operational efficiency, and stakeholder satisfaction, which are essential components of Sustainable Firm Performance [48]. FCA’s role becomes evident in its capacity to align and optimize resource utilization in a way that generates differentiation or cost leadership advantages [49]. For instance, EO often drives firms to take calculated risks and innovate, which enhances their ability to create value in ways that competitors cannot easily replicate [50]. Similarly, Market Orientation enables firms to respond dynamically to evolving customer demands and market trends, with FCA ensuring these responses are strategically directed to deliver superior sustainability outcomes [51]. Organizational Learning complements this process by building the knowledge base necessary to innovate and adapt to environmental changes, with FCA acting as the conduit through which these learning capabilities translate into competitive strategies [52]. Empirical studies consistently highlight FCA as a critical link between Strategic Orientation and Sustainable Firm Performance [53,54]. For example, research on green Entrepreneurial Orientation shows that FCA mediates the relationship by fostering green innovation and resource efficiency, which are integral to sustainable performance [55]. Similarly, studies on Market Orientation demonstrate that FCA enables firms to operationalize market insights into competitive actions that fulfill stakeholder expectations while contributing to environmental and societal goals [56]. Organizational Learning, on the other hand, enhances FCA by enabling firms to acquire, disseminate, and utilize knowledge effectively, fostering continuous innovation that drives sustainable outcomes [57]. Thus, FCA is indispensable as a mediator because it bridges the strategic capabilities provided by SO with the broader goals of sustainability [58]. Without FCA, the potential benefits of SO may remain underutilized, limiting their impact on long-term performance. This mediating role forms the basis for the proposed hypothesis 3:

Hypothesis 3 (H3). 

Strategic Orientation positively affects Sustainable Firm Performance through Firm Competitive Advantage as a mediator.

2.4. Dynamic Environment as a Moderator

Theoretical underpinnings rooted in the Resource-Based View (RBV) and the Dynamic Capabilities Framework provide a robust explanation for why a DE amplifies the influence of Strategic Orientation on Firm Competitive Advantage [59]. RBV posits that firms achieve competitive advantage through resources and capabilities that are valuable, rare, inimitable, and non-substitutable, while dynamic capabilities focus on sensing, seizing, and reconfiguring resources to adapt to environmental changes [60]. DEs demand that firms constantly realign their strategies to maintain competitiveness. SO, encompassing EO, MO, and OL, equips firms with the agility and adaptability needed to respond to external challenges and opportunities [61]. In such contexts, FCA becomes the mechanism through which SO is operationalized to achieve FSP [62]. For instance, EO fosters innovation and proactive market engagement, which are crucial in turbulent environments where opportunities must be rapidly identified and exploited [63]. Empirical evidence supports the moderating role of DE. Studies have shown that firms operating in volatile conditions benefit significantly from aligning their SO with environmental demands [64,65]. For example, research on EO indicates that firms with high entrepreneurial posture outperform competitors in dynamic markets due to their ability to innovate and adapt quickly. Similarly, MO enhances a firm’s ability to anticipate and respond to customer needs, which is critical for maintaining a competitive edge in rapidly evolving industries [66]. DEs also enhance the role of OL as a component of SO. Firms that invest in continuous learning and knowledge dissemination are better equipped to navigate uncertainty and leverage new opportunities, strengthening their competitive position [67]. Moreover, the interplay between SO and FCA is intensified in a DE, as firms must integrate external market insights with internal capabilities to achieve alignment and differentiation [68]. Based on these theoretical and empirical insights, the following hypothesis 4 is proposed:

Hypothesis 4 (H4). 

Dynamic Environment strengthens the influence of Strategic Orientation toward Firm Competitive Advantage.

The research model scheme of this research is shown in Figure 1:

3. Methodology

3.1. Research Subjects and Sampling Techniques

This study employs quantitative survey research to elucidate and evaluate proposed theories and hypotheses through numerical and statistical methodologies [69]. The survey was conducted over a four-month period, from September to December 2024, targeting private companies from various sectors affiliated with the Chamber of Commerce and Industry of Indonesia (KADIN). A purposive sampling method was utilized, commonly employed to target specific groups pertinent to the research objectives [70]. This method was selected to ensure that the sample comprised private companies focused on infrastructure affiliated with HISWANA MIGAS (Oil & Gas Association), AKLI (Electrical Mechanical Association), REI (Housing Association), or GAPENSI (Construction Works Association). The Slovin formula, a recognized method for determining sample sizes in known populations, was employed to calculate the necessary sample size [71]. The total population is 90,850, and with a margin of error of 5%, the minimum required sample size is 398. An extra 20% was added to the sample size to make the results more statistically reliable and to account for possible non-responses or lost data [72]. This buffer provided robustness by addressing unexpected variability or incomplete data in the collected samples. The data collection process yielded 474 respondents, exceeding the minimum criteria and strengthening the study’s validity and reliability.

Table 1. Respondent Characteristics.

Category	Frequency	%
Firm Owner Gender
Male	425	89.66
Female	49	10.34
Firm Owner Education
Doctoral	6	1.27
Master’s	115	24.26
Bachelor’s	258	54.43
Diploma	38	8.02
High School	57	12.03
Firm Owner Age (years)
25–30	21	4.43
31–45	316	66.67
46–50	115	24.26
51–60	22	4.64
Firm Age (years)
<10	327	68.99
10–25	119	25.11
26–50	28	5.91
Firm Size (Number of employees)
10–50	311	65.61
51–100	42	8.86
101–250	103	21.73
>250	18	3.80
Firm Sector
Energy (Oil & Gas)	114	24.05
Electrical Mechanical	136	28.69
Housing	103	21.73
Construction Works	121	25.53
N Total	474	100

presents the respondent characteristics of the 474 respondents in the study. The data indicates a significant male dominance in the business landscape, with male firm owners representing 89.66% (425 respondents) and female owners constituting 10.34% (49 respondents). A majority of firm owners hold a bachelor’s degree, accounting for 54.43% (258 respondents), whereas individuals with master’s degrees constitute 24.26% (115 respondents). The age demographics indicate that 66.67% (316 respondents) of firm owners fall within the 31–45 years range, reflecting a mature and dynamic leadership profile. A majority of firms are relatively young, with 68.99% (327 respondents) being under 10 years old, and they are predominantly small, as 65.61% (311 respondents) employ between 10 and 50 employees. The sectoral distribution shows that Electrical Mechanical (28.69%, 136 respondents) and Construction Works (25.53%, 121 respondents) have the highest percentages of responses. Energy and Housing also have high percentages of responses.

3.2. Research Instruments

Four variables were utilized in the study: the independent variable, SO was constructed based on the research conducted by Deutscher et al. [73]. The framework consists of three dimensions and encompasses a total of 18 items. The items include EO (6 items), MO (6 items), and OL (6 items). The mediator, FCA, was adapted from the study by Ghomi et al. [11] and comprises 4 items. The moderator, DE was established based on the work of Han et al. [62]. It consists of 4 items. Finally, the dependent variable, SFP was derived from Habib et al. [54] and comprises two dimensions with 10 items. The items include economic performance (5 items) and environmental performance (5 items).

The questionnaire was translated into Indonesian using the back-translation method to ensure cultural relevance and respondent comprehension [74]. The process entailed the translation of the original instrument into Indonesian by a bilingual expert proficient in business terminology. An independent bilingual expert subsequently back-translated the Indonesian version into English to ensure semantic equivalence. The translated questionnaire underwent pretesting with a small group of business owners to verify clarity and contextual relevance. Additionally, items were modified to align with the private sector context, incorporating task-specific language and examples pertinent to firm activities.

The study employed an online survey developed via Google Forms for data collection, providing an efficient method to engage the targeted sample. The survey link was disseminated through official WhatsApp groups comprising members from private companies across various sectors under the Chamber of Commerce and Industry of Indonesia (KADIN), including HISWANA MIGAS (Oil & Gas Association), AKLI (Electrical Mechanical Association), REI (Housing Association), and GAPENSI (Construction Works Association). Participants from companies affiliated with KADIN were confirmed to be included in these groups. This approach enabled us to interact directly with the target respondents.

This study employed the survey technique, a prevalent method in social science for collecting quantitative data [75]. The questionnaire utilized a five-point Likert scale, with responses ranging from 1 (strongly disagree) to 5 (strongly agree) [76]. Following the data collection phase, the responses underwent filtering, processing, and analysis utilizing the statistical software SmartPLS 4.1.0.9. The application was selected for its capacity to model intricate relationships among various variables, a crucial component of the research framework for this study [77].

The instrument’s reliability was assessed through the internal consistency of the sample using Cronbach’s alpha [78]. This statistic assesses the reliability of a scale by measuring the correlation among its items. Discriminant and convergent validity were utilized to evaluate the validity of the questionnaire. Convergent validity assesses the correlation between two measures of the same construct, whereas discriminant validity examines the distinctiveness of a construct from other constructs [79]. The results section of the outer model will present a detailed discussion of the instrument’s validity and reliability assessment, which is crucial for ensuring the accuracy and trustworthiness of the research findings [80,81].

3.3. Data Analysis Technique

This study’s data analysis consists of two primary components: the measurement model and the structural model, both analyzed using structural equation modeling (SEM) with SmartPLS-4 software for data processing and analysis [82]. The choice of SmartPLS is supported by several critical factors. PLS-SEM is particularly effective for managing complex models, as demonstrated in this study, which investigates multiple constructs [83]. Secondly, this approach is especially suitable for studies with small to moderate sample sizes, as it imposes fewer restrictions on sample size compared to covariance-based SEM methods. This makes it appropriate for the sample size of 474 respondents in this research [77]. Third, PLS-SEM effectively handles non-normal data distributions, providing reliable analysis for real-world datasets that frequently display non-normality [84].

The measurement model assesses factor loadings that were utilized to assess the strength of association between each item and its respective construct, with values above 0.70 deemed satisfactory, signifying strong relationships [85]. The Average Variance Extracted (AVE) quantifies the average variance accounted for by the items, with values exceeding 0.50 considered acceptable [86]. Reliability was evaluated through composite reliability (CR) and Cronbach’s alpha (CA), both of which surpassed the threshold of 0.70, indicating satisfactory reliability [87]. Discriminant validity was assessed through the Fornell–Larcker (FL) criteria, confirming that the square root of the AVE for each construct surpassed its correlations with other constructs, thereby validating the empirical distinctiveness of the constructs [88]. Furthermore, convergent validity was established, with AVE values exceeding 0.50 and outer loadings surpassing 0.65 for all indicators [85]. Discriminant validity, crucial for confirming that reflective indicators accurately measure their intended variables rather than others, was further substantiated by cross-loading values exceeding 0.70 [89,90]. Further, the FL criteria indicated that the square root of the AVE for each variable, presented diagonally, surpassed the correlations among variables, thereby affirming discriminant validity. The CR and CA values for all constructs exceeded the 0.70 threshold, thereby confirming the reliability and validity of the instrument utilized in this study [91].

Moreover, the structural model analysis assesses the relationships among latent variables through the examination of path coefficients (β), explained variance percentages (R² values), and their significance levels. This demonstrates the model’s explanatory power and confirms the robustness of the findings through multicollinearity assessments utilizing Variance Inflation Factor (VIF) values [92,93]. Regression analysis and hypothesis testing were performed, both acknowledged for their efficacy in structural equation modeling [93]. The structural model analysis evaluates the influence of latent variables on one another by examining explained variance percentages, β and R² values. These metrics indicate the extent to which variance in the dependent variable can be predicted from the independent variables, thereby reflecting the model’s explanatory strength [93]. This process involves regression analysis and hypothesis testing, which are well-established methods in path modeling and structural equation modeling [93]. The model’s goodness of fit is evaluated using the R2 value obtained from each path estimation in SmartPLS [86,87,88]. Hair et al. [94] has determined that R2 values should fall within the range of 0.75 (considerable), 0.50 (moderate), and 0.25 (weak). Hypothesis testing involves the comparison of the t-statistic with the critical t-value and p-value to assess significance. The β quantifies the predictive impact of exogenous variables on endogenous variables and is derived from the original unstandardized beta score [77]. The β are in the range of −1 to 1. Positive values are those that fall within the range of 0 to 1, while negative values are those that fall within the range of −1 to 0. A positive β indicates a beneficial impact, whereas a negative coefficient signifies a harmful effect, with statistical significance established at 95% [95].

4. Results

4.1. Common Method Bias

The Harman single-factor test and VIF analysis were used to evaluate common method bias. The Harman single-factor test findings indicated that only 9 of the 36 components exceeded the eigenvalue threshold of 1. Without a primary component factor rotation, the initial factor accounted for 41.601% of the variation, which is below the recommended threshold of 50% [96,97].

Moreover, the analysis of the inner VIF values demonstrates that all predictors in the structural model are free from significant multicollinearity issues, as all VIF values are well below the commonly accepted threshold of 3.3 [92,94]. Specifically, the VIF value for the relationship between DE and FCA is 1.722, indicating no significant multicollinearity. Similarly, the VIF values for FCA predicting SFP are 1.000, confirming the absence of multicollinearity in these constructs. Furthermore, the VIF value for SO predicting FCA is 1.698. Lastly, the interaction term between DE and SO predicting FCA has a VIF of 1.061, further supporting the robustness of the model. These findings confirm that the structural model is free from significant multicollinearity, ensuring the reliability of the results.

4.2. Measurement Model Test Results

The factor loading validity test results presented in Figure 2 highlight a robust measurement model across the constructs analyzed, reflecting the soundness of the indicators used. The three dimensions of the SO variable—EO, MO, and OL—demonstrate strong factor loadings, with EO items (EO1 to EO6) ranging from 0.805 to 0.909, MO items (MO1 to MO6) between 0.764 and 0.886, and OL items (OL1 to OL6) from 0.762 to 0.839. Economically, these results underscore how firms under KADIN leverage entrepreneurial, market, and learning orientations to align with national goals, such as the Indonesia Emas 2045 vision, by driving innovation, customer-centric approaches, and organizational learning to enhance competitiveness. Similarly, the FCA variable, with loadings between 0.781 and 0.845 across its four indicators (FCA1 to FCA4), highlights the economic importance of competitive advantage in mediating the relationship between strategic orientation and sustainable performance. The DE construct, evaluated through four indicators (DE1 to DE4) with loadings ranging from 0.804 to 0.859, reflects firms’ ability to adapt to external uncertainties, such as regulatory changes and market dynamics, a critical factor in Indonesia’s infrastructure-focused initiatives. Lastly, the SFP variable, segmented into ECP (economic performance) and ENP (environmental performance), demonstrates factor loadings of 0.744 to 0.861 and 0.765 to 0.871, respectively. This emphasizes the dual focus of private firms under KADIN in achieving both profitability and environmental sustainability, ensuring their contributions to equitable development, enhanced competitiveness, and long-term economic growth as envisioned in Indonesia’s strategic agenda.

The results of convergent validity and reliability testing presented in

Table 2. Results of Convergent Validity and Reliability Testing.

Item/Variable		FL	CA	CR	AVE
Strategic Orientation (18-item) (Deutscher et al., 2016) [73]			0.960	0.961	0.596
Entrepreneurial Orientation Dimension (6-item)			0.922	0.923	0.719
EO1	My firm marketed in the past 5 years has very many new lines of products or services.	0.838
EO2	My firm marketed in the past 5 years has changes in product or service lines have usually been quite dramatic.	0.872
EO3	In dealing with its competitors, My firm typically initiates actions which competitors then respond to.	0.841
EO4	In dealing with its competitors, My firm is very often the first business to introduce new products/services, administrative techniques, operating technologies, etc.	0.805
EO5	In general, the top managers of my firm have a strong proclivity for high-risk projects (with chances of very high returns).	0.909
EO6	In general, the top managers of my firm believe that owing to the nature of the environment, bold, wide-ranging acts are necessary to achieve the firm’s objectives.	0.820
Market Orientation Dimension (6-item)			0.896	0.898	0.659
MO1	In this business unit, we meet with customers at least once a year to find out what products or services they will need in the future.	0.814
MO2	We poll end users at least once a year to assess the quality of our products and services.	0.809
MO3	We have interdepartmental meetings at least once a quarter to discuss market trends and developments.	0.886
MO4	Marketing personnel in our business unit spend time discussing customers’ future needs with other functional departments.	0.764
MO5	We periodically review our product development efforts to ensure that they are in line with what customers want.	0.789
MO6	Several departments get together periodically to plan a response to changes taking place in our business environment.	0.804
Organization Learning Dimension (6-item)			0.891	0.894	0.649
OL1	The basic values of this business unit include learning as key to improvement.	0.839
OL2	Learning in my organization is seen as key to commodity necessary to guarantee organizational survival.	0.834
OL3	There is total agreement on our organizational vision across all levels, functions, and divisions.	0.764
OL4	Employees view themselves as partners in charting the direction of the organization.	0.762
OL5	Managers encourage employees to “think outside of the box”.	0.805
OL6	Original ideas are highly valued in this organization.	0.826
Firm Competitive Advantage (4-item) (Ghomi et al., 2021) [10]			0.815	0.820	0.642
FCA1	The quality of its selling product.	0.783
FCA2	The speed of the introduction of the new product to market.	0.794
FCA3	The willingness to customize the orders based on the customers’ preferences.	0.845
FCA4	The reliability of the delivery system.	0.781
Dynamic Environment (4-item) (Han et al., 2022) [62]			0.849	0.859	0.688
DE1	The technology in this industry changes rapidly.	0.844
DE2	The market demand for this industry changes rapidly.	0.810
DE3	The final product or service of this industry is updated quickly.	0.859
DE4	The knowledge and skills required by the industry are updated rapidly.	0.804
Sustainable Firm Performance (10-item) (Habib et al., 2020) [54]			0.931	0.932	0.618
Economic Performance Dimension (5-item)			0.922	0.923	0.719
In comparison to the last five years now…
ECP1	…, the cost for materials purchased is reduced.	0.861
ECP2	…, cost for energy consumption is decreased.	0.852
ECP3	…, the fee for waste discharge is decreased.	0.800
ECP4	…, the return on investment is improved.	0.806
ECP5	…, earnings per share are improved.	0.744
Environmental Performance Dimension (5-item)			0.878	0.881	0.674
ENP1	…, the air emission is reduced.	0.840
ENP2	…, the waste (water and concrete) is reduced.	0.765
ENP3	…, the consumption of hazardous/harmful/toxic materials is decreased.	0.871
ENP4	…, the frequency of environmental accidents decreased.	0.849
ENP5	Our firm increase in energy saved due to conservation and efficiency improvement.	0.774

confirm the robustness of the measurement model across various organizational dimensions. Strategic Orientation (SO), which represents a firm’s ability to align resources and capabilities with external opportunities, exhibited high reliability, with Cronbach’s Alpha (CA) and Composite Reliability (CR) values of 0.960 and 0.961, respectively, although its Average Variance Extracted (AVE) was 0.596. Within SO, the Entrepreneurial Orientation (EO) dimension, which reflects a firm’s proactive, risk-taking, and innovative tendencies, demonstrated strong internal consistency, with a CA of 0.922, CR of 0.923, and AVE of 0.719. Similarly, the Market Orientation (MO) dimension, which indicates a firm’s focus on market intelligence and responsiveness, and the Organizational Learning (OL) dimension, which represents a firm’s ability to acquire and apply knowledge, also showed commendable reliability scores (MO: CA = 0.896, CR = 0.898, AVE = 0.659; OL: CA = 0.891, CR = 0.894, AVE = 0.649). The Firm Competitive Advantage (FCA) variable, which reflects a firm’s ability to differentiate itself in the market, demonstrated acceptable reliability (CA = 0.815, CR = 0.820, AVE = 0.642), confirming its robustness as a mediating construct. Likewise, Dynamic Environment (DE), which captures the external turbulence affecting business operations, also exhibited solid reliability and validity (CA = 0.849, CR = 0.859, AVE = 0.688). The Sustainable Firm Performance (SFP) variable, which measures both economic (ECP) and environmental (ENP) performance, demonstrated very high reliability (CA = 0.931, CR = 0.932, AVE = 0.618). The ECP dimension, representing financial performance outcomes, exhibited strong consistency (CA = 0.922, CR = 0.923, AVE = 0.719), while the ENP dimension, which captures firms’ environmental responsibility, upheld high reliability (CA = 0.878, CR = 0.881, AVE = 0.674), emphasizing the effectiveness of the measurement model in capturing firms’ sustainability performance.

These findings reinforce the theoretical robustness of the constructs used in this study. The high reliability and validity of SO, including EO, MO, and OL, underscore their critical role in helping Indonesian private firms align their strategic resources to achieve economic competitiveness and sustainability in line with Indonesia Emas 2045. The strong FCA reliability supports its function as a mediating construct, highlighting its role in transforming SO into SFP, ensuring firms sustain their market positioning despite regulatory and competitive pressures. Similarly, the DE construct demonstrates the necessity for firms to dynamically adapt to market uncertainties and regulatory shifts, particularly within Indonesia’s infrastructure-driven economic agenda. These insights offer valuable implications for private firms striving to balance financial and environmental performance, thereby directly supporting national economic growth and long-term competitiveness.

The discriminant validity of the constructs was assessed using the Fornell–Larcker (FL) criterion, as detailed in

Table 3. Fornell–Larcker criterion.

Variable	DE	FCA	SO	SFP
Dynamic Environment	0.830
Firm Competitive Advantage	0.648	0.801
Strategic Orientation	0.639	0.600	0.772
Sustainable Firm Performance	0.732	0.627	0.662	0.786

. This method is crucial in ensuring that each construct is conceptually distinct from the others, thereby validating the integrity of the measurement model. The results confirm that the square root of Average Variance Extracted (AVE) for each construct exceeds its corresponding inter-construct correlations, reinforcing the discriminant validity of the model.

Specifically, the diagonal value for Dynamic Environment (DE) is 0.830, surpassing all relevant off-diagonal correlations, including 0.648 with Firm Competitive Advantage (FCA), 0.639 with Strategic Orientation (SO), and 0.732 with Sustainable Firm Performance (SFP). This indicates that DE, which reflects the external volatility affecting firms, is conceptually distinct from the other constructs. Similarly, FCA, which represents a firm’s ability to achieve superior market positioning, has an AVE square root of 0.801, exceeding its correlations with DE (0.648), SO (0.600), and SFP (0.627), thus affirming its mediating role in the model. The Strategic Orientation (SO) construct, which encompasses Entrepreneurial Orientation (EO), Market Orientation (MO), and Organizational Learning (OL), exhibits an AVE square root of 0.772, surpassing its correlations with DE (0.639), FCA (0.600), and SFP (0.662), reinforcing its distinctiveness. Finally, SFP, which measures firms’ ability to balance economic (ECP) and environmental (ENP) performance, holds an AVE square root of 0.786, exceeding its correlations with DE (0.732), FCA (0.627), and SO (0.662). This confirms the discriminant validity of SFP, validating its conceptual distinction within the research model.

Overall, these findings confirm that all constructs meet the Fornell–Larcker criterion, ensuring the reliability and structural integrity of the research model. From a managerial perspective, these results highlight how firms must navigate dynamic market conditions (DE) while leveraging strategic orientations (SO) to enhance competitiveness (FCA) and ultimately achieve sustainable economic and environmental performance (SFP). The distinctiveness of FCA underscores its pivotal role as a mediator that translates entrepreneurial and market-driven strategies into tangible business outcomes. Likewise, the uniqueness of SFP emphasizes the critical balance between profitability and sustainability, supporting long-term economic resilience and environmental responsibility. These insights provide actionable strategies for private firms aiming to align their business models with national economic goals, such as Indonesia Emas 2045, ensuring competitiveness and sustainability in an evolving business landscape.

The HTMT presented in

Table 4. Heterotrait–Monotrait Ratio (HTMT).

Variable	DE	FCA	SO	SFP	DExSO
Dynamic Environment
Firm Competitive Advantage	0.767
Strategic Orientation	0.699	0.669
Sustainable Firm Performance	0.823	0.705	0.697
Dynamic Environment x Strategic Orientation	0.250	0.339	0.222	0.329

offers further evidence for evaluating discriminant validity within the study’s model. The majority of HTMT values fall below the commonly accepted threshold of 0.85, suggesting adequate discriminant validity among most constructs. The findings from the FL criterion and HTMT analysis confirm the discriminant validity of the structural model, demonstrating that SO, DE, FCA and SFP are distinct empirical constructs.

4.3. Structural Equation Test Results

The bootstrapping results of the entire model and the path coefficient assessment presented in

Table 5. Path Coefficient and Significance Test.

Hypotheses	Path	β	t-Values	p-Values	Results
H1	SO → FCA	0.299	6.793	0.000	Support
H2	FCA → SFP	0.627	21.809	0.000	Support
H3	SO → FCA → SFP	0.187	6.614	0.000	Support
H4	SOxDE → FCA	0.155	8.597	0.000	Support

illustrate the path coefficients of each exogenous (independent) variable in relation to the endogenous (dependent) variable in the study. Table 5 is as follows:

The β for the relationship between SO and FCA is 0.299, with a STDEV of 0.044, as indicated in Table 5. The T-value for this relationship is 6.793, surpassing the critical threshold of 1.96, and the p-value is 0.000 (p < 0.05), indicating a statistically significant positive relationship at the 0.05 level. The relationship between SFP and FCA (β = 0.627; t = 21.809; p = 0.000) demonstrates a strong positive and statistically significant relationship. Finally, the interaction term (SOxDE) on FCA exhibits a β = 0.155, accompanied by a STDEV of 0.049. The T-Statistic is 8.597, and the p Value of 0.000 (p < 0.05) indicate the statistical significance of this interaction effect. Table 5 confirms that both the direct relationship between SO and FCA and the mediated relationship of SO on SFP through FCA are statistically significant. Additionally, the direct effect of SO on SFP (β = 0.187; t = 6.614; p = 0.000) is significant, indicating that FCA serves as a partial mediator between SO and SFP. R2 is a metric that ranges from 0 to 1, indicating the extent to which independent variables collectively affect the value of the dependent variable. The R2 value is used to assess the degree of influence that a particular independent latent variable has on a dependent latent variable. The R2 value for FCA is 0.502, indicating that SO accounts for 50.2% of the variance in FCA, suggesting a moderate influence. Additionally, 49.8% of the variance may be attributed to other unexamined variables. For SFP, the R2 value is 0.393, demonstrating that FCA and SO together explain 39.3% of the variance in SFP, indicating a weak influence. This indicates that, although FCA and SO significantly affect SFP, there remains a considerable proportion (60.7%) of other variables not accounted for in this model that may also influence SFP. Structural equation test results are depicted in Figure 3.

5. Discussion

5.1. The Relationship Betwenn Strategic Orientation (SO) and Firm Competitive Advantage (FCA) (Hypothesis 1 Accepted)

The H1 that SO positively affects FCA is strongly supported by the findings, with a statistically significant path coefficient (β = 0.299, t = 6.793, p = 0.000). These results demonstrate the critical role of SO in enhancing FCA. The EO of private companies reflects firms’ proactive, innovative, and risk-taking tendencies, which are critical in volatile and competitive industries. EO facilitates the identification and exploitation of emerging opportunities and fosters innovation that differentiates firms from their competitors [23].

While prior studies have primarily emphasized EO as a driver of innovation and competitive advantage, this study extends the understanding of EO by contextualizing its impact within private companies under KADIN’s umbrella. The findings reveal that EO not only supports innovation but also strengthens firms’ agility in addressing industry-specific challenges, such as those in oil and gas or construction, by leveraging strategic agility to navigate market uncertainties. This complements existing research by highlighting the intersection of EO and dynamic capabilities in sustaining competitiveness, particularly in emerging markets where volatility is prevalent [24].

Further, MO private companies enable firms to anticipate, understand, and respond to customer needs and market trends. MO allows firms to address current customer demands through effective market intelligence and emphasizes anticipating future market opportunities to innovate and differentiate [25,26]. Although previous literature highlights the customer-centric advantages of MO, this study contributes by demonstrating how MO aligns resources with market needs in competitive industries like housing and construction, thus offering practical insights for aligning operational strategies with customer-driven innovation [27,28]. This deepens the understanding of MO’s role in enhancing FCA by linking it directly to the dynamic environments faced by private companies.

Lastly, OL private companies represent a firm’s ability to acquire, disseminate, and apply knowledge to improve strategic and operational outcomes. OL fosters dynamic capabilities by balancing the refinement of existing processes (exploitation) with the pursuit of new opportunities (exploration), enabling firms to adapt to environmental changes and maintain their FCA [30,31]. The study adds to the literature by illustrating OL’s role in industries like oil and gas, where continuous learning is critical for navigating regulatory landscapes and volatile markets. While existing studies often focus on OL in large multinational firms, this research underscores its importance for smaller, private firms operating in dynamic sectors, expanding the scope of OL’s applicability. The synergy among EO, MO, and OL enhances a firm’s dynamic capabilities, such as sensing, seizing, and reconfiguring resources, which are crucial for sustaining FCA [33]. Empirical evidence indicates that firms with strong SO demonstrate superior innovation, market alignment, and adaptability, even in disruptive environments [24,34]. Unlike prior research, this study provides a more integrated view by examining the interplay between these strategic orientations in a cohesive framework, showcasing their combined impact on enhancing FCA.

Analysis of respondent characteristics indicates that 89.66% of firm owners are male. Furthermore, a significant portion of the respondents are well-educated, with 54.43% holding at least a bachelor’s degree and 24.26% attaining a master’s degree. This highlights a leadership base with strong educational qualifications, which likely fosters informed decision making and strategic agility. EO thrives in environments where leadership embraces innovation and calculated risk-taking, attributes often associated with higher educational attainment [98]. The strong educational background supports the firm’s capacity to leverage strategic orientations, enabling them to identify opportunities and sustain competitive advantages [23]. The majority of firm owners (66.67%) are in the 31–45 age range, a demographic often characterized by a balance of experience and willingness to innovate. Firms led by such individuals are likely to adopt MO strategies, anticipating future trends and creating innovative solutions [99]. Furthermore, 68.99% of firms are less than 10 years old, indicating a predominance of young and dynamic companies. Younger firms often prioritize OL to adapt to market changes and build competitive advantages in rapidly evolving industries [100]. Approximately 65.61% of firms are small-sized (10–50 employees), and 28.69% operate in the electrical mechanical sector, followed closely by construction works (25.53%) and oil and gas (24.05%). These sectors require high levels of innovation and responsiveness to market needs, emphasizing the importance of SO dimensions. In particular, EO is crucial for firms in the oil and gas sector, where risk-taking and innovation drive differentiation [101].

5.2. The Relationship Between Firm Competitive Advantage (FCA) and Sustainable Firm Performance (SFP) (Hypothesis 2 Accepted)

The H2 that FCA positively affects SFP is strongly supported by the findings, with a statistically significant path coefficient (β = 0.627, t = 21.809, p = 0.000). These results demonstrate the FCA plays a pivotal role in driving SFP. FCA, derived from the possession of unique, valuable, and inimitable resources, aligns with the principles of the Resource-Based View (RBV), which emphasizes the strategic significance of resources in achieving competitive differentiation and cost efficiencies [36]. These advantages allow firms to differentiate themselves in competitive markets and achieve cost efficiencies, both of which are foundational for sustainable performance.

FCA enables firms to enhance financial, social, and environmental performance, which collectively define SFP. Companies with strong FCA are better positioned to innovate, adapt, and respond to market changes, creating resilience in the face of volatility and uncertainty [37]. For example, private firms in the oil and gas sector under HISWANA MIGAS utilize FCA to drive operational efficiency and technological innovation, enabling them to reduce costs while meeting environmental regulations and stakeholder expectations. Similarly, construction firms under GAPENSI and housing firms under REI capitalize on FCA to optimize resource utilization and align their operations with sustainable development goals, which enhance their long-term viability and stakeholder trust.

Dynamic capability theory complements RBV by highlighting FCA’s role in enabling firms to sense, seize, and reconfigure resources in response to changing market conditions [42]. For KADIN-affiliated firms, this adaptability is particularly critical, as these sectors often face fluctuating demand, regulatory shifts, and technological disruptions. FCA empowers these firms to align strategic initiatives, such as green innovation and business model transformation, with broader sustainability objectives, ensuring consistency between organizational goals and environmental and societal imperatives [43,44].

Moreover, FCA fosters stakeholder alignment, which is integral to SFP. Firms that leverage their competitive advantages to exceed customer expectations and address stakeholder concerns are more likely to secure long-term loyalty and trust [40]. For example, firms under AKLI (electrical mechanical sector) often invest in innovative solutions that enhance energy efficiency and reduce environmental impact, aligning with both market demands and sustainability frameworks. Such practices not only drive immediate financial returns but also contribute to the firm’s broader social license to operate, a key determinant of long-term performance [38,39].

Empirical evidence consistently supports the notion that FCA serves as a bridge between operational efficiency and sustainable outcomes. Firms with robust FCA demonstrate superior performance across financial, social, and environmental dimensions, even in highly competitive or resource-constrained settings [41]. This comprehensive influence highlights FCA’s dual role as both a performance enhancer and a sustainability driver, aligning operational priorities with long-term goals and stakeholder expectations.

Thus, supported by the respondent characteristics, 54.43% of firm owners hold a bachelor’s degree and 24.26% possess a master’s degree. This educational profile suggests that firm owners are well-equipped to strategically manage and leverage their competitive advantages. Higher education levels are often associated with an increased capacity to implement innovation, adapt to market dynamics, and align business practices with long-term sustainability goals. Owners with advanced degrees also possess the strategic foresight to integrate FCA into operational and strategic decisions, enhancing financial, environmental, and social performance outcomes. Additionally, 68.99% of firms are relatively young (<10 years old), indicating a strong propensity for adaptability and innovation. Younger firms tend to rely heavily on FCA to establish market positioning, differentiate themselves, and build sustainable competitive advantages in rapidly evolving sectors like energy and construction. Lastly, the majority of firms (65.61%) employ between 10 and 50 people, aligning with the characteristics of small and medium-sized enterprises (SMEs). Such firms often operate with limited resources, making FCA—rooted in differentiation, innovation, and cost efficiency—critical for sustaining performance [102]. This study offers a novel contribution by integrating the Resource-Based View (RBV) and Dynamic Capability Theory to explain how Firm Competitive Advantage (FCA) drives Sustainable Firm Performance (SFP) in a specific context of private firms under the KADIN umbrella. Unlike previous studies that often examine FCA in isolation or within broad, multinational contexts, this research focuses on the interplay of FCA with sector-specific dynamics, such as those in oil and gas, construction, and housing industries in emerging markets. Furthermore, it highlights the role of educational background and firm demographics (e.g., age and size) in shaping the ability of private firms to operationalize FCA into sustainable outcomes. This nuanced approach extends the existing literature by demonstrating how FCA can be tailored to meet the unique demands of SMEs in resource-constrained and volatile environments. The findings bridge a critical gap in understanding how private firms align their competitive strategies with sustainability imperatives, providing actionable insights for practitioners and policymakers aiming to foster innovation, adaptability, and resilience in competitive industries.

5.3. The Indirect Effect of Strategic Orientation (SO) on Sustainable Firm Performance (SFP) Through Firm Competitive Advantage (FCA) (Hypothesis 3 Accepted)

The H3 that Strategic Orientation indirectly affects Sustainable Firm Performance through Firm Competitive Advantage (H3: SO → FCA → SFP) is supported by the findings, with a statistically significant path coefficient (β = 0.187, t = 6.614, p = 0.000). This mediating role aligns with the theoretical frameworks of the Resource-Based View (RBV) and Dynamic Capability Theory, which posit that superior firm performance is achieved through the development and effective deployment of unique, valuable, and inimitable capabilities [46]. FCA acts as the mechanism through which the strategic insights and capabilities derived from SO are leveraged to create competitive advantages. These advantages allow firms to establish unique market positions and achieve both differentiation and cost efficiencies, essential for sustained competitiveness [47]. Private companies under KADIN operate in dynamic and competitive markets that require continuous adaptation and innovation. FCA ensures that SO like EO’s risk-taking and innovative tendencies are effectively translated into value creation, operational efficiency, and long-term stakeholder satisfaction [52].

SO provides the foundation for FCA by equipping firms with the strategic capabilities necessary to sense, seize, and reconfigure resources. EO drives firms to pursue innovation and take calculated risks, creating opportunities for differentiation that competitors cannot easily replicate [45]. MO complements this by enabling firms to anticipate and respond to market trends, ensuring that customer demands are met with precision. FCA consolidates these efforts, ensuring that market insights are operationalized into competitive actions that enhance resilience and adaptability [48]. OL, meanwhile, builds the knowledge base required for continuous improvement, with FCA acting as the conduit for transforming this knowledge into strategic advantage [57].

FCA strengthens the link between SO and SFP by facilitating the alignment and optimization of resources to deliver sustainability outcomes. This is particularly evident in the context of KADIN-affiliated firms, where industries like energy and construction face increasing pressures to balance profitability with environmental and societal goals. For instance, FCA enables firms in the oil and gas sector (HISWANA MIGAS) to translate their entrepreneurial and market-oriented strategies into green innovations that meet regulatory standards and stakeholder expectations [55]. Similarly, housing and construction firms (REI and GAPENSI) utilize FCA to align operational efficiency with sustainable development goals, ensuring long-term performance while fulfilling societal needs [40].

Research on green EO demonstrates that FCA mediates this relationship by fostering green innovation and resource efficiency, which are integral to sustainable outcomes [55]. MO studies further reveal that FCA operationalizes market insights into strategies that fulfill customer demands while contributing to broader sustainability objectives [56]. OL amplifies FCA’s mediating role by enabling firms to acquire, disseminate, and utilize knowledge effectively, driving continuous innovation that supports FSP [58]. This study advances the existing literature by providing an integrated analysis of how Strategic Orientation (SO), through Firm Competitive Advantage (FCA), impacts Sustainable Firm Performance (SFP) in the context of private firms under KADIN’s umbrella. Unlike prior research, which often examines SO, FCA, and SFP in siloed frameworks or focuses on general contexts, this study highlights the nuanced interplay between these constructs in dynamic and resource-constrained environments. Specifically, the mediating role of FCA is elaborated as a conduit through which the entrepreneurial, market, and learning orientations of firms are transformed into competitive actions that align with sustainability imperatives. The findings contribute to the existing body of knowledge by showcasing how FCA operationalizes strategic orientations to address sector-specific challenges such as regulatory compliance, environmental sustainability, and societal expectations, which are particularly relevant for industries like energy, construction, and housing. This research supplements existing studies by illustrating the practical pathways through which firms can leverage SO and FCA to achieve not only financial gains but also long-term resilience and adaptability in volatile markets, filling a critical gap in understanding the dynamic interdependence of these variables in emerging economies.

5.4. The Moderating Effect of Dynamic Environment (DE) on Strategic Orientation (SO) Toward Firm Competitive Advantage (FCA) (Hypothesis 4 Accepted)

The results support Hypothesis 4 (H4: SO × DE → FCA, β = 0.155, t = 8.597, p = 0.000), demonstrating that a DE strengthens the relationship between SO and FCA in private companies. The moderating role of DE is rooted in RBV and DC theoretical frameworks, which emphasize the importance of adapting to environmental volatility to maintain competitiveness [59]. DEs are characterized by rapid and unpredictable changes, requiring firms to be agile and responsive. In such settings, SO—which includes Market Orientation, Entrepreneurial Orientation, and Organizational Learning—equips firms with the necessary capabilities to sense, seize, and reconfigure resources effectively [60].

In turbulent markets, Entrepreneurial Orientation enables firms to innovate and take calculated risks, identifying opportunities that competitors may overlook. For example, private firms under HISWANA MIGAS in the oil and gas sector leverage EO to develop new technologies or alternative energy solutions that align with regulatory and market shifts, thereby strengthening FCA [63]. DE also intensifies the importance of MO, as firms must continuously anticipate and respond to rapidly evolving customer needs and market trends. For instance, REI-affiliated housing firms utilize MO to adapt their product offerings to shifting consumer preferences, enhancing their competitive positioning in dynamic markets [66]. OL plays a critical role in enabling firms to build resilience by fostering a culture of continuous learning and knowledge sharing. DE magnifies the importance of OL, as firms need to acquire and apply new knowledge swiftly to navigate uncertainties and capitalize on emerging opportunities [67].

The moderating effect of DE is evident in the interaction plot (Figure 4). Firms operating in a dynamic environment (High DE) show a significantly stronger positive relationship between SO and FCA compared to those in stable environments (Low DE). At low levels of SO, firms in High DE achieve higher FCA (2.967) than those in Low DE (2.435). As SO increases, this gap widens, with firms in High DE achieving a markedly higher FCA (3.875) than their Low DE counterparts (2.723). This demonstrates that the presence of a DE not only amplifies the benefits of SO but also provides a competitive edge by making the FCA more impactful, essential for survival and success. This study provides novel insights by examining the moderating role of Dynamic Environment (DE) in the relationship between Strategic Orientation (SO) and Firm Competitive Advantage (FCA). Unlike prior research, which often views DE as an external variable influencing firm performance in isolation, this study integrates DE into the Resource-Based View (RBV) and Dynamic Capability (DC) frameworks to highlight how environmental volatility interacts with internal strategic capabilities. The findings reveal that DE not only amplifies the positive effects of SO on FCA but also reshapes how firms operationalize EO, MO, and OL in highly dynamic sectors like oil and gas, housing, and construction. Specifically, this research demonstrates that DE intensifies the strategic value of proactive and innovative behaviors, market adaptability, and organizational learning, offering a competitive edge in turbulent markets. By showing that firms in high DE settings benefit disproportionately from strong SO, this study contributes to the literature by addressing a critical gap: how environmental turbulence moderates the interplay between internal orientations and competitive advantage. These results expand theoretical and practical understandings of SO and FCA in volatile market conditions, offering actionable insights for firms aiming to enhance resilience and sustainability in unpredictable contexts.

6. Conclusions

This study’s results demonstrate that strategic orientation (SO) significantly and positively impacts firm competitive advantage (FCA), underscoring the critical role of its dimensions—entrepreneurial orientation (EO), market orientation (MO), and organizational learning (OL)—in fostering agility, adaptability, and innovation. These capabilities enable private companies affiliated with the KADIN to build and sustain competitive advantages, particularly in volatile and competitive sectors. Furthermore, FCA plays a crucial role in directly enhancing sustainable firm performance (SFP) by translating strategic differentiation and cost-efficiency efforts into long-term financial, environmental, and societal outcomes, ensuring resilience and sustainability in dynamic markets. Additionally, FCA is established as a partial mediator between SO and SFP, highlighting its indispensable role in operationalizing the strategic potential of SO. By bridging the strategic insights provided by EO, MO, and OL with practical execution, FCA ensures that the benefits of SO are effectively realized in ways that enhance both competitive positioning and overall firm performance. The study also reveals that dynamic environment (DE) strengthens the relationship between SO and FCA, demonstrating the importance of adaptability and responsiveness in turbulent market conditions. DE magnifies the effects of EO by fostering innovation and proactive strategies, enhances the value of MO by enabling firms to respond dynamically to evolving customer demands, and emphasizes the importance of OL by encouraging continuous knowledge acquisition and application. This interaction creates a synergistic effect that significantly boosts FCA and enables firms to thrive in highly competitive and rapidly changing environments.

7. Theoretical Implication

The findings of this study contribute significantly to the Resource-Based View (RBV) and Dynamic Capability (DC) Theory, advancing their theoretical discourse and integration. The study extends RBV by emphasizing that SO serves as a critical antecedent in creating valuable, rare, inimitable, and non-substitutable (VRIN) resources. Moreover, it highlights FCA as the operational mechanism that translates these resources into sustainable outcomes, addressing critiques of RBV’s static nature by demonstrating how firms dynamically utilize resources to build competitive advantages. Simultaneously, the study reinforces DC Theory by validating the importance of dynamic capabilities in sensing, seizing, and reconfiguring resources, particularly under the influence of a DE. The moderating role of DE underscores how volatile contexts amplify the need for strategic agility, enhancing the SO-FCA relationship and compelling firms to continuously adapt and innovate. Furthermore, this study bridges RBV and DC Theory, showing that RBV and DC are complementary and jointly operationalized through FCA to achieve SFP. These insights not only enrich the theoretical foundations of RBV and DC Theory but also offer a robust integrated framework for understanding sustainable performance in dynamic contexts.

8. Practical Implication

The findings of this study provide valuable practical implications for private companies affiliated with the KADIN, including those in dynamic and competitive sectors such as HISWANA MIGAS (oil and gas), AKLI (electrical mechanical), REI (housing), and GAPENSI (construction). First, firms should prioritize the development and alignment of SO—specifically EO, MO, and OL—to build agility and adaptability. For example, firms in the oil and gas sector can leverage EO to pursue innovations in renewable energy and risk-based decision making, while housing and construction firms can use MO to better anticipate customer demands and regulatory shifts. Additionally, fostering a culture of continuous learning through OL will enable firms across all sectors to acquire, disseminate, and apply knowledge effectively, ensuring resilience and competitiveness in evolving markets.

Second, the study highlights the critical role of FCA as a mechanism for translating strategic initiatives into tangible performance outcomes. Firms must focus on building FCA through innovation, resource optimization, and differentiation strategies that align with both market demands and sustainability goals. For instance, electrical mechanical firms under AKLI can develop cost-efficient and environmentally friendly technologies, while construction firms under GAPENSI can adopt green building practices to enhance their market positioning and stakeholder trust.

Third, the moderating role of DE underscores the necessity of adaptability and responsiveness in turbulent market conditions. Firms operating in volatile industries should integrate environmental scanning and scenario planning into their strategic processes to sense and seize opportunities more effectively. This is particularly important for firms in resource-intensive sectors like oil and gas, where market fluctuations and regulatory changes require quick and strategic responses.

Finally, the study provides actionable insights for policymakers and business associations such as KADIN. Supporting initiatives that enhance the strategic capabilities of member firms—such as training programs on entrepreneurial risk-taking, market intelligence, and knowledge management—can strengthen overall industry competitiveness. Moreover, fostering collaboration among firms within KADIN’s associations to share best practices and resources can enhance collective adaptability and performance in the face of dynamic challenges.

9. Limitation

This study has several limitations that warrant consideration for future research. First, the study is limited by its focus on private companies affiliated with the KADIN, specifically those in sectors such as oil and gas, electrical mechanical, housing, and construction. While this focus provides valuable insights into these industries, the findings may not be fully generalizable to other sectors, such as technology or agriculture, which may operate under different strategic and environmental dynamics. Second, the research context is confined to Indonesia, a developing country with unique economic, regulatory, and market characteristics. While the findings contribute to understanding strategy adaptation in emerging markets, they may not be directly applicable to developed economies where firms face different competitive pressures and regulatory environments. The cultural and institutional factors inherent to Indonesia could influence the applicability of the results in other geographic contexts.

Third, the study adopts a cross-sectional research design, which captures relationships at a single point in time. This approach limits the ability to establish causal relationships and observe the dynamic nature of strategic orientation, competitive advantage, and firm performance over time. Fourth, the conceptual framework relies on DE as the sole moderating variable, potentially overlooking other contextual factors that might influence the relationship between SO and FCA. Fifth, the study predominantly uses self-reported data, which may introduce common method bias. Although statistical tests like the Harman single-factor test and VIF analysis confirmed the absence of significant bias, self-reported data may still be influenced by subjective perceptions, potentially affecting the reliability of the results. Lastly, the study’s dependent variable, SFP, focuses on economic and environmental dimensions, which may not fully capture the broader scope of sustainability, such as social performance or contributions to equitable development. Expanding the performance metrics to include these dimensions could provide a more holistic view of sustainable firm performance.

10. Future Research Directions

Future research should expand the scope of this study by including firms from diverse sectors, such as technology, agriculture, and healthcare, to explore how SO and FCA function under different strategic and environmental dynamics. Additionally, examining other geographic contexts, including developed economies, would provide comparative insights into how cultural, institutional, and economic factors influence these relationships. A longitudinal research design is recommended to capture the temporal evolution of SO, FCA, and SFP, allowing for a deeper understanding of how these dynamics respond to external shocks, such as technological disruptions or regulatory changes. Future studies should also incorporate additional moderators, such as organizational culture, technological readiness, or government policies, to provide a more nuanced understanding of the factors that enhance or constrain these relationships. Expanding mediators, such as innovation capabilities or stakeholder engagement, could further enrich the theoretical framework. To mitigate the potential biases of self-reported data, multi-source data collection methods, such as archival records or expert evaluations, should be integrated for greater robustness. Moreover, the scope of SFP should be broadened to include social and equitable development dimensions, such as community engagement and employee well-being, offering a more holistic view of sustainability. Given the increasing influence of digital transformation and climate change, future research could also investigate the role of green innovation and digital technologies in shaping FCA and achieving sustainability goals. Finally, adopting a multi-level analysis that examines individual, team, and organizational-level interactions would provide a richer understanding of how SO is implemented and operationalized across firms in dynamic and complex environments. These directions would significantly enhance the theoretical and practical insights into how firms sustain competitive advantages and achieve long-term performance.