The issues of fostering internationalization and innovating business models through digital capabilities appear neglected in the research on small and medium enterprises (SMEs). The literature on internationalization theory can be enriched by understanding how SMEs innovate their business models to promote their internationalization in the digital era. We specifically examined the influence of digital capabilities in the form of digital knowledge sharing capability, digital business capability (DBC), and using a digital platform for the internationalization process as part of the mediating role of business model innovativeness (BMI). Based on the empirical data of 213 manufacturing SMEs, we concluded that the digital capabilities we studied do not directly foster internationalization. Instead, digital capabilities (digital knowledge sharing capability, DBC, and digital platform capability) indirectly boost the internationalization of SMEs through BMI. Based on these insights, managers should embrace digitalization activities to innovate their business model, which in turn can help enter more stable and advanced markets in the global economy to maximize profitability.
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