Abstract
Small and Medium Enterprises (SMEs) play an important role in the development of the Indonesian economy. SMEs contribute to the increase in Gross Domestic Product (GDP), increase exports, absorb labor, and become a source of income for most people. SMEs are a sector that is vulnerable to competition, despite having strong resilience to the crisis. This study aims to determine the effect of entrepreneurial orientation and absorptive ability on competitive advantage. This research was conducted on SME managers throughout Denpasar City using PLS-SEM analysis, with the help of SmartPLS 3.0 Software. The results of the study show that competitive advantage is influenced by entrepreneurial orientation. In addition to having an impact on increasing competitive advantage, entrepreneurial orientation also has an impact on increasing absorptive abilities. Another finding is that absorptive ability does not mediate the relationship between entrepreneurial orientation and competitive advantage. Keywords: Entrepreneurship Orientation; Absorptive Ability; Competitive Advantage.
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