The Role of Entrepreneurial Leadership, Knowledge Management, and Digital Capability in Enhancing Entrepreneurial Performance and Value Co-Creation in the Education Sector

Abstract

This study investigates the influence of entrepreneurial leadership, knowledge management, and digital capability on entrepreneurial performance in Indonesia’s education sector while also examining the mediating role of value co-creation. Grounded in the Resource-Based Theory, Capability Theory, Behavioral Approach to Leadership, Service-Dominant Logic, and Entrepreneurship Theory, this research provides a comprehensive framework to understand how intangible resources, leadership behavior, and value co-creation jointly enhance institutional performance. Employing a quantitative research design, data were collected through a survey of 350 junior high schools selected via multistage cluster sampling, with respondents comprising principals, teachers, and school committee members. Structural Equation Modeling (SEM) was applied to test the reliability, validity, model fit, and structural relationships among variables. The results reveal that knowledge management and digital capability play a pivotal role in improving entrepreneurial performance. Furthermore, entrepreneurial leadership, knowledge management, and digital capability collectively enhance value co-creation within educational institutions. These findings suggest that strengthening knowledge management and digital capability strategies is essential for advancing school-level entrepreneurial performance. From a policy perspective, this study highlights the need for training initiatives, supportive regulations, and institutional frameworks to promote sustainable educational entrepreneurship.

1. Introduction

Educational institutions play a pivotal role in cultivating high-quality human capital. Among the essential competencies is entrepreneurial capability, which significantly contributes to national economic development. Entrepreneurship not only stimulates the creation of new employment opportunities but also serves as an instrument for poverty reduction and enhancement in sustainable economic growth. Based on the most recent data in 2024, the entrepreneurship and MSME sector in Indonesia demonstrates a substantial contribution to the national economy, employing approximately 119 million workers and contributing around 61.9% to the national GDP (Antara News, 2024). Furthermore, the number of workers engaged in entrepreneurial activities reached 139.6 million people, representing 91.74% of the total labor force (Kompas.id, 2024). These statistics underscore the critical role of entrepreneurship in driving employment generation and strengthening Indonesia’s overall economic performance.

This finding aligns with evidence from a study conducted across 27 EU member states, which demonstrated that entrepreneurship plays a crucial role in enhancing economic development both within the EU and globally (Rusu et al., 2022; Acs et al., 2011).

The Global Entrepreneurship Monitor (GEM) 2022/2023 report indicates a decline in entrepreneurial performance within Indonesian educational institutions compared to the previous year. While the performance score was 6.6 in 2021/2022, it dropped to 4.7 in 2022/2023. This downward trend highlights the need for further investigation into the factors that can enhance entrepreneurial performance in schools (Global Entrepreneurship Monitor, 2023).

Previous studies suggest that multiple factors contribute to the enhancement in entrepreneurial performance. These factors are entrepreneurial leadership (Pu et al., 2022a; Alsharif et al., 2021; Zeb & Ihsan, 2020; Du et al., 2021), knowledge management (C. Li et al., 2020; Qader et al., 2022; Feng et al., 2022; Tshiaba et al., 2021; Annarelli et al., 2021), digital capability (Wang et al., 2022; Limniou et al., 2021; De la Calle et al., 2020; Luo et al., 2021; Khin & Ho, 2019), and value co-creation (Chao et al., 2019; Otchere et al., 2019). The primary objective of this study is to examine the impact of these factors on entrepreneurial performance. In addition, this study seeks to investigate the mediating role of value co-creation in the relationship between entrepreneurial leadership, knowledge management, digital capability, and entrepreneurial performance.

Although prior studies have extensively examined the relationships between entrepreneurial leadership, knowledge management, digital capability, and organizational performance across the business and technology sectors (C. Li et al., 2020; Wang et al., 2022; Saunila et al., 2019), empirical evidence within the educational context remains limited. Most existing research focuses on corporate environments, where performance is primarily measured in financial or market terms. However, in educational institutions, particularly schools, entrepreneurial performance involves non-financial dimensions such as innovation in learning, stakeholder engagement, and institutional adaptability (Bagheri & Harrison, 2020; Leithwood & Jantzi, 2005).

Moreover, while Value Co-Creation has been recognized as a key mechanism linking organizational capabilities to performance in service-dominant industries (Vargo & Lusch, 2016, 2010; Ramaswamy & Ozcan, 2018), its mediating role in education has not been systematically investigated. The educational setting, characterized by hierarchical structures and limited digital maturity, may hinder the full realization of collaborative value creation (Grönroos & Voima, 2013). Consequently, there is a pressing need to examine whether the established theoretical relationships among Entrepreneurial Leadership, Knowledge Management, Digital Capability, and Value Co-Creation—as demonstrated in business studies—hold true within the education sector, especially in developing countries such as Indonesia.

This study addresses these gaps by empirically testing these interrelationships within schools, providing theoretical enrichment to Resource-Based Theory (RBT) (Barney, 1991; Wernerfelt, 1984), Capability Theory (Sen, 1999; Teece et al., 1997), and Service-Dominant Logic (SDL) (Vargo & Lusch, 2010). It contributes to expanding the discourse of educational entrepreneurship, highlighting how intangible resources and collaborative processes influence institutional innovation and performance.

This study contributes to the existing literature through three main dimensions of novelty. First, it integrates entrepreneurial leadership, knowledge management, digital capability, and value co-creation into a single empirical model to explain entrepreneurial performance. Unlike prior studies that examined these relationships separately (Pu et al., 2022a; C. Li et al., 2020; Wang et al., 2022), this research provides a comprehensive analysis of their simultaneous interactions and mediating mechanisms.

Second, this study introduces contextual novelty by examining these relationships in the school environment, a setting rarely explored in previous entrepreneurial research, which has largely focused on business or technology sectors. By applying the value co-creation perspective within educational institutions, this study extends its theoretical applicability beyond commercial contexts (Wang et al., 2022; Karakose et al., 2021).

Finally, this study addresses inconsistencies in previous findings regarding the influence of digital capability on performance (Wang et al., 2022; Heredia et al., 2022) by testing a mediating model that clarifies its indirect effects through value co-creation. Thus, this study offers both theoretical advancement and contextual enrichment, reinforcing the relevance of entrepreneurial behavior and digital capability in enhancing performance within educational settings.

Accordingly, this study aims to contribute both theoretically and practically by providing empirical evidence on how these factors interact to improve entrepreneurial performance in the Indonesian education sector. The findings are expected to support policymakers and school leaders in formulating strategies to strengthen knowledge management and digital capability in fostering educational entrepreneurship.

In line with the identified research gaps and objectives, this study seeks to answer the following questions: How do entrepreneurial leadership, knowledge management, and digital capability influence entrepreneurial performance and value co-creation in Indonesia’s education sector, and what is the mediating role of value co-creation in these relationships?

The remainder of this paper is structured as follows. Section 2 reviews the relevant theoretical framework, including the development of hypotheses. Section 3 outlines the research materials and methodology. Section 4 presents the empirical results. Section 5 discusses the implications of the results, and Section 6 concludes with this study’s contributions, limitations, and future research directions.

2. Theoretical Framework

This study is grounded in an integrative theoretical framework combining several complementary perspectives. The Resource-Based Theory (Barney, 1991; Wernerfelt, 1984; Miles, 2012) serves as the grand theory, explaining how internal resources and capabilities drive organizational performance. This is reinforced by Capability Theory (Crocker & Robeyns, 2009; Walker, 2005), which emphasizes the development of dynamic institutional capacities. The Behavioral Approach to Leadership (Northouse, 2019) provides a lens to understand leadership behaviors that foster innovation and performance, while the Service-Dominant Logic (Vargo & Lusch, 2010; Wang et al., 2022) frames value co-creation as a mechanism for generating educational and entrepreneurial outcomes. At the middle theory level, the Entrepreneurship framework (Cunningham & Lischeron, 1991) guides the exploration of entrepreneurial dynamics within educational institutions. Together, these theories offer a coherent foundation for examining how entrepreneurial leadership, knowledge management, and digital capability interact to enhance value co-creation and entrepreneurial performance in the education sector.

The theoretical framework of this study integrates key variables to explain the causal relationships within the proposed research model. Entrepreneurial leadership (Pu et al., 2022b; Musara & Nieuwenhuizen, 2020; Alsharif et al., 2021; Sayyam et al., 2021; Gupta et al., 2004), knowledge management (C. Li et al., 2020; X. Chen et al., 2020; Hsu et al., 2007; Davenport, 1998; Hurley & Hult, 1998), and digital capability (Khin & Ho, 2019; Wang et al., 2022; Zhou & Wu, 2009) are conceptualized as exogenous variables that influence the mediating construct of value co-creation (Ranjan & Read, 2014; Prahalad & Ramaswamy, 2000; Rönnberg Sjödin et al., 2016; Kohler et al., 2011; Wang et al., 2022). In turn, value co-creation is hypothesized to positively affect the endogenous variable entrepreneurial performance (Chandler & Hanks, 1993; Pu et al., 2022a; Liu et al., 2022; Dong et al., 2020; Z. Shi et al., 2022).

This study integrates multiple theoretical perspectives to underpin the research model. Resource-Based Theory (RBT) emphasizes that an organization’s tangible and intangible resources—such as facilities, leadership competencies, knowledge management capacity, and digital capabilities—constitute its strengths and competitive advantage (Wernerfelt, 1984; Miles, 2012; Drucker, 1985). Capability Theory highlights the importance of an institution’s ability to utilize and mobilize resources effectively to achieve goals, with emphasis on learning, knowledge management, digital utilization, and stakeholder engagement (Crocker & Robeyns, 2009; Walker, 2005). Behavioral Approach to Leadership focuses on leaders’ task- and relationship-oriented behaviors, explaining how school leaders combine performance-driven actions with relationship-building to enhance team effectiveness (Northouse, 2019). Service-Dominant Logic (SDL) stresses value creation through interactions and co-creation with stakeholders, underlining the importance of collaboration and engagement in delivering educational services (Vargo & Lusch, 2010; Wang et al., 2022). Finally, Entrepreneurial Leadership views leaders as visionaries who mobilize and motivate others to achieve organizational objectives, adapt to diverse stakeholder needs, and drive innovation (Cunningham & Lischeron, 1991). Collectively, these theories provide a robust conceptual framework to examine how entrepreneurial leadership, knowledge management, and digital capability influence value co-creation and entrepreneurial performance in schools.

This section further elaborates on the key factors examined in this study. The first factor, entrepreneurial leadership, has been extensively investigated in previous research, with robust evidence consistently indicating its positive impact on entrepreneurial performance (Pu et al., 2022b; Alsharif et al., 2021; Zeb & Ihsan, 2020; Du et al., 2021). Entrepreneurial leadership in schools refers to the capacity of educational leaders to influence and inspire their members in setting strategic targets, identifying opportunities, and engaging in entrepreneurial activities that align with institutional goals (Gupta et al., 2004; Musara & Nieuwenhuizen, 2020). This form of leadership is characterized by a strong performance orientation, diligence, forward-thinking, confidence-building, and the cultivation of positive relationships with key stakeholders, including teachers, the education office, school committees, parents, and external partners (Alsharif et al., 2021; Sayyam et al., 2021). Furthermore, it emphasizes inspiration, collaboration, empowerment of members’ capabilities, and a positive mindset (Pu et al., 2022b; Northouse, 2019). Through these qualities, entrepreneurial leadership enhances school performance by fostering and sustaining diverse entrepreneurial initiatives within the educational environment (Renko et al., 2015; Bagheri & Pihie, 2011).

Knowledge management refers to a systematic approach that leverages knowledge and expertise to generate and deliver added value, thereby enhancing organizational efficiency. This process involves the collection, organization, and transformation of knowledge into forms that can be effectively applied within the organization (C. Li et al., 2020). Knowledge management is defined as the process of transforming knowledge into innovative products and services as an integral component of organizational management. This practice facilitates the exchange and dissemination of knowledge, thereby fostering innovation and the generation of new ideas (Feng et al., 2022). In this study, knowledge management is conceptualized as the ability of schools to leverage knowledge and expertise creatively to generate added value through the processes of collecting, organizing, and transforming knowledge for practical implementation, thereby enhancing organizational performance. The practice of knowledge management encompasses activities such as knowledge sharing, innovation capacity, and absorptive capacity (C. Li et al., 2020).

Digital capability refers to the capacity to leverage technology in developing interconnected products and services, thereby enabling organizations to enhance service delivery and generate differentiated value (Wang et al., 2022). Another perspective defines it as the ability to employ technology in managing information systems, encompassing innovation, organizational integration, strategy, operations, and management to effectively respond to dynamic environments (Annarelli et al., 2021). Based on the above perspective, digital capability in schools can be understood as the ability to leverage various technologies to facilitate the delivery of educational services and enhance institutional performance. It can be identified through the capacity to utilize digital tools, recognize technological opportunities, respond to digital transformation, master digital applications, and develop innovative services supported by technology (Wang et al., 2022; Khin & Ho, 2019; Zhou & Wu, 2009).

Value co-creation refers to a collaborative process in which stakeholders actively engage with an organization to jointly create value (Ranjan & Read, 2014; Prahalad & Ramaswamy, 2000). It is the process of generating value through engagement, interaction, and shared experiences among stakeholders (Battersby, 1981; Ranjan & Read, 2014; Polo Peña et al., 2014). Based on the above understanding, value co-creation in this study is defined as the ability of schools to actively engage and empower stakeholders—including school committees, parents, local education authorities, partners, and the community—in various activities to create shared value and enhance educational services. Value co-creation is reflected in three dimensions: knowledge sharing (exchange of ideas and creativity), equity (access, transparency, alignment, and role distribution), and interaction (dialogue and collaborative engagement) (Wang et al., 2022; Ranjan & Read, 2014).

Entrepreneurial performance refers to the accomplishment of entrepreneurial activities that contribute to overall organizational performance (Pu et al., 2022b; Chandler & Hanks, 1993). Another perspective views it as the accomplishment of entrepreneurial activities that create opportunities for achieving organizational goals (Baron, 2004; Pu et al., 2022a). In this study, it is defined as the extent to which schools succeed in implementing entrepreneurship development programs that contribute to overall school performance. It can be assessed through program growth, satisfaction with achieved outcomes, and comparative performance against other schools (Chandler & Hanks, 1993; Pu et al., 2022b; Yun et al., 2022).

Previous studies have stated that entrepreneurial leadership has a positive and significant influence on entrepreneurial performance (Pu et al., 2022a; Alsharif et al., 2021; Zeb & Ihsan, 2020; Du et al., 2021). School Entrepreneurial Leadership is characterized by the ability of school institutions that are performance-oriented; hard-working; thinking ahead; encouraging confidence; building good relationships with teachers; and building good relationships with education government, school committees, students’ parents, and partners. In addition, inspiration, encouraging cooperation, empowering members’ abilities, and thinking positively will encourage efforts to grow various entrepreneurial activities carried out by schools. Thus, the hypothesis of this study can be formulated as Hypothesis 1 (H1): entrepreneurial leadership has a positive and significant influence on entrepreneurial performance.

There are previous studies that state that the practice of entrepreneurial leadership affects value co-creation (Sharma, 2021; Haug & Mergel, 2021; Garavaglia et al., 2021). Entrepreneurial leadership owned by the institution, namely the ability to adapt, innovate, and build good relationships with various stakeholders, can encourage various stakeholders to contribute ideas, suggestions, and inputs and become involved in various activities that can create educational services that are expected by all parties. This leads to the formulation of Hypothesis 2 (H2): entrepreneurial leadership has a positive and significant effect on value co-creation.

Previous research shows that knowledge management has a positive and significant effect on entrepreneurial performance (C. Li et al., 2020; Qader et al., 2022; Feng et al., 2022). Knowledge management practices through knowledge sharing, innovation capacity, and knowledge absorption capacity in schools will encourage efforts to grow various entrepreneurial activities carried out by schools. Thus, the hypothesis of this study can be formulated as Hypothesis 3 (H3): knowledge management has a positive and significant effect on entrepreneurial performance.

Previous studies have shown that the practice of knowledge management affects value co-creation (Ranjbarfard & Heidari Sureshjani, 2018; H. Zhang et al., 2019; Y. Zhang et al., 2019). Schools that have the ability to manage knowledge and information and share these with team members will affect their ability to share information and receive various ideas, suggestions, and inputs from stakeholders, so that they can align services according to expected needs (C. Li et al., 2020; Ranjbarfard & Heidari Sureshjani, 2018). This leads to the formulation of Hypothesis 4 (H4): knowledge management has a positive and significant effect on value co-creation.

Previous references state that digital capability has a positive and significant effect on performance (Wang et al., 2022; Limniou et al., 2021; De la Calle et al., 2020). Schools that have the ability to utilize digital technology can improve their entrepreneurial performance in developing various entrepreneurship development programs. Thus, the hypothesis of this study can be formulated as Hypothesis 5 (H5): digital capability has a positive and significant effect on entrepreneurial performance.

Previous studies have shown that there is a relationship between digital capability and value co-creation (Wang et al., 2022; Polo Peña et al., 2014; Saunila et al., 2019). The digital capabilities will help the school in building engagement, interaction, and shared experiences between it and stakeholders, making stakeholders play an active role in helping schools provide the expected services. Based on the explanation above, the hypothesis of this study is formulated as Hypothesis 6 (H6): digital capability has a positive and significant effect on value co-creation.

Previous studies have shown that there is an influence of value co-creation on performance (Trang et al., 2022; Chao et al., 2019; Otchere et al., 2019). It shows that various value co-creation activities through knowledge sharing, equity, and interaction between schools and stakeholders can create shared value in realizing the expected educational services. This activity will improve school performance in the development of entrepreneurial activities at school. Thus, the research hypothesis can be formulated as Hypothesis 7 (H7): value co-creation has a positive and significant effect on entrepreneurial performance.

Studies have shown that entrepreneurial leadership in influencing entrepreneurial performance requires other factors that act as mediators (Pu et al., 2022a; Hussain & Li, 2022). Schools with entrepreneurial leadership capabilities can influence their members in being innovative and creative in enhancing entrepreneurial performance. To achieve this, schools must engage in value co-creation activities such as knowledge sharing, openness to ideas and feedback, and stakeholder involvement in service delivery. These strategies collectively strengthen performance and support the development of diverse entrepreneurship programs within schools. Based on that, we can formulate Hypothesis 8 (H8): value co-creation has a positive and significant effect in mediating the influence of entrepreneurial leadership on entrepreneurial performance.

Studies have shown that knowledge management in influencing entrepreneurial performance requires other factors that act as mediators (C. Li et al., 2020; Qader et al., 2022; Hussain & Li, 2022). In practice, there is a relationship between knowledge management and the value co-creation process. Value co-creation activities have a positive impact on the knowledge management process (Y. Zhang et al., 2019). Based on the above perspective, schools with effective knowledge management capabilities can enhance performance through the mediating role of value co-creation, achieved by engaging stakeholders and service users in the provision of educational services. Based on that, we can formulate Hypothesis 9 (H9): value co-creation has a positive and significant effect on mediating the influence of knowledge management on entrepreneurial performance.

Previous research has shown that we need factors that mediate the influence of digital capability on performance (Khin & Ho, 2019; Heredia et al., 2022), such as value co-creation (Wang et al., 2022), which has the potential to mediate the influence of digital capabilities on entrepreneurial performance. The school’s digital capabilities include the ability to use digital technology, identify various digital technologies, respond to digital transformation, master digital technology, and develop innovative services using digital technology, which will improve the school’s entrepreneurial performance if it first carries out value co-creation activities through interaction, sharing ideas, creativity, and sharing roles with stakeholders. We can formulate Hypothesis 10 (H10): value co-creation has a positive and significant effect on mediating the influence of digital capability on entrepreneurial performance.

Based on the various explanations above, this research model can be seen in Figure 1. The conceptual model in this study was developed from established theoretical perspectives, including the Resource-Based Theory (Barney, 1991), Capability Theory (Sen, 1999; Teece et al., 1997), and the Service-Dominant Logic (Vargo & Lusch, 2016, 2010). These frameworks provide a comprehensive foundation that justifies the interrelationships among Entrepreneurial Leadership, Knowledge Management, Digital Capability, Value Co-Creation, and Entrepreneurial Performance, thereby ensuring that the proposed model is theoretically sound and empirically grounded. In addition, the model was developed based on theoretical foundations and empirical findings from previous studies that examined the causal relationships among the investigated variables. Prior research provided empirical justification for the inclusion and direction of the hypothesized paths in the proposed model, thereby strengthening its theoretical grounding and analytical validity (Byrne, 2016; Hair et al., 2018; Kline, 2015; Collier, 2020).

3. Materials and Methods

This study employed a quantitative research method using a survey approach (Sekaran, 2016). The unit of analysis in this study was the school institution, with principals, teachers, and school committee members as respondents. This multi-respondent design was deliberately chosen to capture a holistic view of entrepreneurial leadership, knowledge management, digital capabilities, value co-creation, and entrepreneurial performance within schools. The determination of data sources in this study refers to the 360-degree feedback theory, which emphasizes performance assessment from multiple perspectives to obtain a more objective and comprehensive evaluation. In the context of schools, performance was assessed through principals, teachers, and school committee members. This multi-source evaluation ensures objectivity and minimizes single-rater bias in assessing school entrepreneurial performance (Kandpal et al., 2018).

From a theoretical perspective, the involvement of multiple stakeholders is consistent with the value co-creation model (Prahalad & Ramaswamy, 2004; Dollinger et al., 2018), which emphasizes the interaction between different actors in generating organizational outcomes. Principals represent strategic leadership and decision-making authority (Leithwood & Jantzi, 2005), teachers represent instructional practices and knowledge application (Harris & Spillane, 2008), while school committee members represent community engagement and external accountability (Epstein, 2011). By including these three groups, this study ensures triangulation of perspectives, thereby reducing single-source bias and providing a more valid measurement of the constructs under study (Podsakoff et al., 2003).

The selection of respondents is also aligned with the structural equation modeling (SEM) framework, which requires the measurement of latent variables through multiple indicators (Hair et al., 2019). Since entrepreneurial performance in education is influenced by leadership, instructional practices, and community participation, the inclusion of principals, teachers, and school committees provides the necessary diversity of indicators to represent each construct comprehensively. This approach increases the robustness of the SEM model and enhances the generalizability of findings.

Their perspectives served as objective benchmarks for evaluating the school’s entrepreneurial performance (Kandpal et al., 2018). The survey instrument we used had a 7-point Likert scale, which has been demonstrated to offer greater sensitivity and measurement accuracy compared to scales with fewer response categories (Preston & Colman, 2000; Dawes, 2008).

Regarding indicator specification, all constructs in the measurement model were specified as first-order reflective constructs, including entrepreneurial leadership, knowledge management, digital capability, value co-creation, and entrepreneurial performance. This approach is consistent with the recommendations of Diamantopoulos and Winklhofer (2001) and established literature in the field. Each indicator was treated as a manifestation of its underlying latent variable and expected to covary with other indicators within the same construct. This reflective specification was further supported by high factor loadings, convergent validity (AVE), and internal consistency reliability (CR) for all constructs.

The population of this study consisted of 42,260 junior high schools in Indonesia, both public and private. The multistage cluster sampling method was employed (Bandur, 2021). The number of samples in this study was 350 schools based on the table of Krejcie and Morgan (1970) with a confidence level of 95% and an error limit of 5% or 0.05 (Sekaran, 2016; Krejcie & Morgan, 1970).

Table 1. Summary of school profiles.

Demographics	Category	Number of Schools	Percentage
Schools by Provinces in Western Region	East Java	28	9%
	Middle Java	35	10%
	West Java	33	9%
	DKI Jakarta	16	4%
	West Sumatera	20	6%
	Riau Island	29	8%
	DI Yogyakarta	17	5%
	Schools number	178	51%
Schools by Provinces in Central Region	South Borneo	22	6%
	South Sulawesi	28	8%
	North Borneo	25	7%
	Bali	18	5%
	Gorontalo	34	10%
	East Borneo	9	3%
	Schools number	136	39%
Schools by Provinces in Eastern Region	Papua	22	6%
	East Nusa Tenggara	14	4%
	Schools number	36	10%
School type	Public schools	210	60%
	Private schools	140	40%
Total Schools		350	100%

Source: Authors’ own work.

presents the profiles of the schools that participated in this study, based on several categories: schools by provinces in western, central, and eastern regions of Indonesia.

To minimise the risk of common method bias (CMB), several procedural and statistical remedies were implemented, following the recommendations of Podsakoff et al. (2023). Procedurally, this study involved multiple respondents (principals, teachers, and school committee members) for each school to reduce single-source bias, and respondent anonymity as well as voluntary participation were ensured to limit social desirability and evaluation apprehension. Statistically, Harman’s single-factor test was conducted, and the results showed that the largest factor accounted for only 27% of the variance, which is well below the 50% threshold. This finding indicates that common method bias is unlikely to pose a significant threat to the data.

The data collection was conducted from January to April 2024 using an online survey distributed via Google Forms. Prior to distribution, the questionnaire underwent expert review by three scholars in educational management to ensure content validity and clarity (Creswell & Creswell, 2018). The online survey approach was chosen due to its efficiency, accessibility, and ability to reach respondents across Indonesia’s wide geographical regions (Dillman et al., 2014; Evans & Mathur, 2005).

The questionnaire link was disseminated through official communication channels of the Ministry of Education and local education offices, targeting selected schools across western, central, and eastern Indonesia. Each participating school received three individual response forms designated for the principal, one teacher representative, and one school committee member, ensuring a multi-perspective assessment consistent with the 360-degree feedback method (Podsakoff et al., 2003; Kandpal et al., 2018).

Respondents were provided with an informed consent statement that explained the study objectives, confidentiality, and voluntary nature of participation, in accordance with ethical research standards (Bryman, 2016). The exclusive use of online surveys allowed for automated data collection, reduced administrative errors, and improved response tracking. Completed responses were screened for validity and completeness prior to statistical analysis.

As indicated in Table 1, 51% of the schools included in this study were located in Indonesia’s western provinces, 39% in the central region, and 10% in the eastern provinces. Regarding school type, 60% were public and 40% were private institutions. The final sample for analysis comprised 971 valid respondents, consisting of 350 school principals (100%), 350 teacher representatives (100%), and 271 school committee members (77%).

Table 2. Demographic characteristic of respondents.

Demographic Variable	Category	Frequency (n = 971)	Percentage (%)
Age Group (years)	<30	121	12.5
	30–39	274	28.2
	40–49	312	32.1
	≥50	264	27.2
Year of Service	<10 years	221	22.8
	11–20 years	358	36.9
	>20 years	392	40.3
Role/Position	Principal	350	36.0
	Teacher	350	36.0
	School Committee Member	271	28.0

Source: Authors’ own work.

summarizes the demographic characteristics of the respondents. The majority of respondents were between 40–49 years old (32.1%) and had 11–20 years of service (36.9%).

This demographic profile suggests that most participants possessed substantial experience in the education sector, allowing for more informed judgments about school leadership, knowledge management, and digital capability practices. Prior studies have emphasized that respondent maturity and professional tenure enhance the accuracy and depth of responses in educational leadership research, as experienced educators and administrators tend to better understand institutional processes and performance dynamics (Leithwood & Jantzi, 2005; Harris & Spillane, 2008).

Furthermore, the diversity across age, years of service, and school type strengthens the representativeness and generalizability of the findings. According to Podsakoff et al. (2003), demographic variability helps reduce single-source bias, while Hair et al. (2019) note that heterogeneity among respondents contributes to the robustness of measurement models in structural equation modeling (SEM). Thus, the demographic variation among participants in this study ensures that the collected data reflect balanced perspectives and enhance the validity and reliability of the overall analysis.

4. Results

Data were analyzed using Structural Equation Modeling (SEM) with AMOS, involving the assessment of both the measurement and structural models (Gallagher et al., 2008; Hair et al., 2018). The measurement model validity was assessed through the Standardized Loading Factor (SLF), with indicators considered valid at SLF ≥ 0.5. Convergent validity was confirmed by the Average Variance Extracted (AVE), where AVE ≥ 0.5 indicated satisfactory validity. Reliability was examined using Construct Reliability (CR) to ensure internal consistency of the indicators, with CR values ≥ 0.7 regarded as reliable (Hair et al., 2018). Reliability can also be tested based on Cronbach’s Coefficient Alpha, using the criteria suggested by scholars (Prabowo & Bandur, 2021): >0 = no reliability, >0.5 = poor reliability, >0.6 = fair reliability, >0.7 = acceptable reliability, >0.8 = good reliability, >0.9 = excellent reliability, 1 = perfect reliability. This study used indicators as the measures to test the measurement model, and the validity and reliability test results of the measurement model are shown in

Table 3. Results of measurement model evaluation (validity and reliability tests).

Variable	Indicator	SLF	α	AVE	CR
Entrepreneurial Leadership	Performance Orientation	0.687	0.968	0.805	0.982
	Strive	0.682
	Thinking far ahead	0.818
	Boosts confidence	0.865
	Build a good relationship with teachers	0.890
	Build good relations with the Education Office	0.851
	Build good relationships with the school committee	0.897
	Build good relationships with students’ parents	0.896
	Build good relationships with partners	0.860
	Inspire	0.895
	Encourage collaboration	0.890
	Empower member capabilities	0.896
	Positive Thinking	0.856
Knowledge Management	Actively share with educators	0.863	0.962	0.817	0.980
	Actively share with education staff	0.836
	Available time	0.831
	Carry out the innovation process	0.878
	Actively looking for innovative ideas	0.899
	Meet with partners	0.803
	Have a meeting with a professional	0.784
	Recognizing the demands of environmental change	0.857
	Storing knowledge with technology	0.784
	Leverage a wide range of knowledge within the technology platform	0.805
	Realize the benefits of knowledge	0.857
Digital Capability	Ability to utilize various technological devices	0.860	0.944	0.764	0.967
	Ability to identify various new technological developments	0.859
	Ability to quickly learn new digital technological developments	0.832
	Ability to utilize technology for learning innovation	0.862
	Ability to utilize technology for innovation in management	0.855
	Utilize websites for innovation	0.767
	Utilize Instagram for innovation	0.677
	Ability to utilize school Youtube for innovation	0.765
	Ability to utilize other digital technology facilities for innovation	0.843
Value co-creation	Open to ideas and suggestions from stakeholders	0.856	0.960	0.833	0.980
	Share information clearly	0.891
	Providing access	0.872
	Realizing the importance of the important role	0.887
	Provide services in line with stakeholder expectations	0.823
	Listen to stakeholders	0.872
	Dialogue with stakeholders	0.877
	Provide opportunities for stakeholders to be involved	0.863
Entrepreneurial performance	The growth of entrepreneurial development programs for students	0.639	0.935	0.618	0.951
	The growth of the school canteen program	0.639
	The growth of the school cooperative program	0.669
	The growth of other production unit programs	0.732
	Satisfaction with various entrepreneurial development programs for students	0.833
	Satisfaction with the growth of various production unit programs	0.856
	Satisfaction with the benefits obtained by the school	0.872
	Comparison of entrepreneurial development programs in schools with other schools	0.819
	Comparison of production unit programs in schools with other schools	0.797
	Comparison of benefits obtained by schools with other schools	0.806

Source: Authors’ own work.

.

As presented in Table 2, all indicators satisfied the validity criteria with SLF values ≥ 0.5, ensuring their appropriateness for measuring the constructs. The variables demonstrated adequate convergent validity (AVE ≥ 0.5) and reliability (CR ≥ 0.7), supported by Cronbach’s Alpha coefficients that indicated strong internal consistency. With all validity and reliability requirements fulfilled, the analysis was extended to the model fit evaluation.

In the context of Structural Equation Modeling (SEM), model adequacy is typically assessed through multiple goodness-of-fit (GOF) indices representing different categories—absolute, incremental, and parsimonious fit measures. A model is generally regarded as having an acceptable overall fit if at least four to five indices meet the established thresholds, ensuring a balanced assessment across various dimensions of model fit (Hair et al., 2018; Kline, 2015; Byrne, 2016).

As presented in

Table 4. Goodness-of-fit test.

	Goodness-of-Fit Index	Criteria	Value	Description
Absolute Fit Indices	RMSEA	≤0.08	0.065	Good–Fit
	CMIN/DF of Chi-square/df	≤3.00	2.467	Good–Fit
	GFI	≥0.90	0.781	Marginal–Fit
Incremental Fit Indices	AGFI	≥0.90	0.755	Marginal–Fit
	NFI	≥0.90	0.858	Marginal–Fit
	TLI	≥0.90	0.903	Good–Fit
	CFI	≥0.90	0.910	Good–Fit
	IFI	≥0.90	0.910	Good–Fit
	RFI	≥0.90	0.847	Marginal–Fit
Parsimonious Fit Indices	PGFI	0–1	0.698	Good–Fit
	PNFI	0–1	0.798	Good–Fit

Source: Result of AMOS version 24, the authors’ work (2025).

, the structural model in this study demonstrates an acceptable level of fit. Specifically, several indices achieved values within the recommended ranges—RMSEA (0.065 < 0.08), CMIN/DF of Chi-square/df (2.467 < 3), TLI (0.903), CFI (0.910), IFI (0.910), PGFI (0.698), and PNFI (0.798)—indicating that the model adequately represents the underlying data structure. Although the GFI (0.781) and AGFI (0.755) values are categorized as marginal fit, such results remain acceptable for models of high complexity and with a large number of observed indicators (Marsh et al., 2004).

Model modification in this study was performed in accordance with established SEM practices to enhance model fit while maintaining theoretical integrity. The refinement process followed a theory-driven modification approach, in which changes to the model were guided by both statistical indicators and conceptual justification rather than purely empirical adjustments (MacCallum, 1986; Byrne, 2016; Kline, 2015). Specifically, correlations among a limited number of error terms were introduced based on substantive similarities among indicators—such as overlapping wording, shared contextual meaning, or respondent interpretation—to reduce measurement redundancy and improve the accuracy of latent construct representation (Hair et al., 2018; Jöreskog & Sörbom, 1993; Xiong et al., 2025). This practice is consistent with established SEM/CFA literature, which supports the inclusion of error covariances when both empirical evidence and theoretical rationale are present (D. Shi et al., 2019). The achievement of acceptable model fit indicates alignment with theoretical expectations and allows for progression to the structural model analysis, which was subsequently conducted to evaluate the proposed research hypotheses.

This methodological refinement ensured that the model met the recommended thresholds for multiple goodness-of-fit indices across absolute, incremental, and parsimonious fit categories, thereby satisfying the minimum criteria suggested by Hair et al. (2018). As a result, the final model achieved a theoretically consistent and statistically acceptable structure, supporting its validity for hypothesis testing and interpretation. The process of model modification, therefore, was not arbitrary but systematically executed to enhance the explanatory power and parsimony of the model, aligning with the principles of structural equation modeling recommended in contemporary literature.

The results indicate that the research model achieved an acceptable level of overall goodness-of-fit (Byrne, 2016; Collier, 2020; Haryono, 2013). A well-fitted model signifies that the theoretical covariance structure is consistent with the observed data, thereby meeting theoretical expectations and validating the model’s adequacy. Consequently, the analysis could proceed to the next stage—structural model assessment for hypothesis testing—based on the established model fit (Byrne, 2016).

In this study, a significance level of 5% is used with the one-tailed method. The significance value of a tailed t of 5% is 1.645 (absolute), where the significance value of the t-value (C.R.) is less than −1.645 and greater than 1.645. Thus, if the value of the path coefficient (estimate) is positive and the t-value (C.R) is >1.645 or the resulting significance value (p-value) is <0.05, it will show a positive and significant influence on the relationship between variables (Hair et al., 2014). The following are the results of the structural model test in Figure 2.

Based on Figure 2, the structural model test yielded several findings. First, entrepreneurial leadership was found to have a positive but non-significant effect on entrepreneurial performance (β = 0.041, p = 0.413), thereby rejecting the first hypothesis. By contrast, entrepreneurial leadership demonstrated a significant positive effect on value co-creation (β = 0.306, p < 0.001), thus supporting the second hypothesis. Furthermore, knowledge management was shown to exert a significant positive effect on entrepreneurial performance (β = 0.499, p < 0.001), confirming the third hypothesis, as well as on value co-creation (β = 0.679, p < 0.001), supporting the fourth hypothesis. Similarly, digital capability significantly and positively influenced entrepreneurial performance (β = 0.409, p < 0.001), supporting the fifth hypothesis, and also had a significant positive effect on value co-creation (β = 0.369, p < 0.001), thereby validating the sixth hypothesis. Finally, value co-creation was found to have a positive but non-significant effect on entrepreneurial performance (β = 0.065, p = 0.449), leading to the rejection of the seventh hypothesis.

Regarding the mediating effects, value co-creation was found to exert a positive but non-significant mediating influence on the relationship between entrepreneurial leadership and entrepreneurial performance (β = 0.020, p = 0.553). Similarly, value co-creation demonstrated a positive yet non-significant mediating effect on the relationship between knowledge management and entrepreneurial performance (β = 0.044, p = 0.502). In the same vein, the mediating effect of value co-creation on the relationship between digital capability and entrepreneurial performance was also positive but statistically insignificant (β = 0.024, p = 0.398). Consequently, all mediating hypotheses were not supported. A summary of the hypothesis testing results is presented in

Table 5. Direct and indirect influence hypothesis test results.

	Path	Standardized Estimate	S.E	C.R.	P	Description
H1	Entrepreneurial Leadership → Entrepreneurial Performance	0.041	0.041	0.819	0.413	Positive, Insignificant
H2	Entrepreneurial Leadership → Value Co-Creation	0.306	0.031	7.452	0.000 *	Positive, Significant
H3	Knowledge Management → Entrepreneurial Performance	0.499	0.066	6.294	0.000 *	Positive, Significant
H4	Knowledge Management → Value Co-Creation	0.679	0.038	13.543	0.000 *	Positive, Significant
H5	Digital Capability → Entrepreneurial Performance	0.409	0.047	6.890	0.000 *	Positive, Significant
H6	Digital Capability → Value Co-Creation	0.369	0.029	9.100	0.000 *	Positive, Significant
H7	Value Co-Creation → Entrepreneurial Performance	0.065	0.094	0.757	0.449	Positive, Insignificant
H8	Entrepreneurial Leadership → Value Co-Creation → Entrepreneurial Performance	0.020	-	-	0.553	Not Mediating
H9	Knowledge Management → Value Co-Creation → Entrepreneurial Performance	0.044	-	-	0.502	Not Mediating
H10	Digital Capability → Value Co-Creation → Entrepreneurial Performance	0.024	-	-	0.398	Not Mediating

Significance level: *: significant at alpha 5% (p ≤ 0.05). Source: AMOS Results version 24, Researcher’s Own Work (2024).

.

5. Discussion

Several key findings have emerged based on the results of the analysis. First, knowledge management and digital capability were found to have a positive and significant effect on entrepreneurial performance. Second, entrepreneurial leadership, knowledge management, and digital capability showed a positive and significant influence on value co-creation. Third, this study revealed that entrepreneurial leadership and value co-creation does not exert a significant effect on entrepreneurial performance. Finally, value co-creation was not found to mediate the relationships among entrepreneurial leadership, knowledge management, digital capability, and entrepreneurial performance.

In the school context, knowledge management capability is reflected in the institution’s ability to cultivate a culture of information and knowledge sharing, as well as the dissemination of best practices among teachers and staff. Schools also foster innovation by generating and implementing creative ideas to enhance educational services while actively establishing partnerships with stakeholders such as alumni, companies, industries, universities, organizations, and professionals. Moreover, schools that recognize the value of knowledge and are responsive to environmental changes are more likely to adapt to technological advancements by leveraging digital platforms as sources of information, data, and knowledge. Effective implementation of knowledge management practices enables schools to strengthen their entrepreneurial performance through the development of diverse entrepreneurship programs, thereby supporting overall school performance.

These findings are consistent with prior studies, particularly in the business sector. For instance, evidence from research in Pakistan demonstrated that the ability to share knowledge—considered a core activity of knowledge management—significantly enhances organizational performance (C. Li et al., 2020). A study conducted in China revealed that knowledge management capabilities—particularly through knowledge absorption, knowledge transfer, and knowledge application—positively contribute to enhancing innovation performance (Feng et al., 2022). Another study conducted in Congo demonstrated that knowledge management practices—including knowledge-sharing behavior, innovation capability, knowledge absorption, dynamic capabilities, and the ability to recognize opportunities—have been proven to enhance organizational performance (Tshiaba et al., 2021). Based on the above discussion, it can be concluded that knowledge management exerts a positive and significant influence on entrepreneurial performance, both within educational institutions and across business organizations.

The digital capabilities possessed by schools play a crucial role in supporting entrepreneurial development activities. The effective utilization of digital technologies enhances innovation and creativity, particularly in marketing school-based entrepreneurial products by showcasing outputs, activities, and achievements through platforms such as social media, Instagram, and YouTube. These practices have been shown to positively influence schools’ entrepreneurial performance, creating added value that strengthens the school’s visibility, growth, and overall advancement.

The results of this study align with previous research. For instance, a study conducted in China demonstrated that the ability to adopt and utilize emerging digital technologies significantly supports the effectiveness of digital transformation and contributes to improved organizational performance (Wang et al., 2022). A study conducted in the United Kingdom found that students equipped with digital skills are able to engage more effectively in their studies, as digital literacy fosters flexibility in the learning process (Limniou et al., 2021). Another study conducted in Spain revealed that digital capabilities in internet-based marketing exert a positive and significant influence on the quality of company services (De la Calle et al., 2020). Based on the above discussion, it can be concluded that digital capability has a positive and significant impact on entrepreneurial performance, both within business organizations and educational institutions.

The findings of this study demonstrate that knowledge management and digital capability enhance entrepreneurial development activities in schools. These include fostering students’ entrepreneurial spirit through projects such as processing natural resources within the school environment, cultivating crops, recycling waste, and producing marketable products for both the school and the surrounding community. Furthermore, such activities contribute to building a positive perception among stakeholders, thereby generating additional benefits for the school.

The findings of this study highlight the critical role of Knowledge Management and Digital Capability in enhancing Entrepreneurial Performance within schools. In line with Capability Theory (Teece et al., 1997), organizational performance depends not merely on the possession of resources but on the ability to effectively transform them into productive actions. Schools that demonstrate strong knowledge management practices and digital adaptability are thus more capable of improving their entrepreneurial outcomes (Nonaka & Takeuchi, 1995).

As an extension of the Resource-Based Theory (RBT) (Wernerfelt, 1984; Barney, 1991), this study confirms that intangible resources—such as digital and knowledge capabilities—constitute a strategic source of competitive advantage in achieving superior performance (Teece, 2018). Knowledge-based and digital resources enable schools to reconfigure and innovate their processes, thereby fostering greater adaptability and innovation in achieving educational objectives (Zahra & George, 2002).

The findings of this study further demonstrate that entrepreneurial leadership, knowledge management, and digital capability collectively enhance value co-creation activities. Specifically, entrepreneurial leadership enables schools to adapt to changing environments, generate innovations and new ideas, foster constructive relationships with diverse educational stakeholders, and motivate as well as empower individuals to develop and create. Moreover, by taking responsibility for transformative changes, school leaders can strengthen collaborative value-creation processes with stakeholders, thereby fostering shared goals and collective benefits.

The ability of schools to implement knowledge management is reflected in activities such as sharing information and knowledge, fostering partnerships, being receptive to ideas and suggestions, and encouraging contributions from stakeholders. These practices enable schools to deliver services that align with stakeholder expectations. Furthermore, the integration of digital capabilities supports this process by facilitating communication through digital platforms, providing access to timely information on school developments, and leveraging social media to enhance the school’s positive image.

The positive impact of knowledge management on value co-creation supports the findings of previous studies. For instance, research conducted in Iran demonstrated that effective knowledge management practices enhance value co-creation by fostering an active learning environment, where collaborative learning services contribute to the development of learning outcomes that meet expectations (Ranjbarfard & Heidari Sureshjani, 2018). A study in China found that knowledge management practices through knowledge sharing and the organization’s ability to receive new knowledge have a positive effect on value creation. Another study found that organizations that have knowledge, information, recommendations, and the ability to interact with various parties are able to increase activities in sharing and integrating various knowledge, so that they are able to create value together with various parties (H. Zhang et al., 2019). It can be concluded that knowledge management has a positive effect on increasing value co-creation both in educational institutions and in business institutions.

The findings of this study align with prior research, confirming that digital capability plays a crucial role in enhancing value co-creation. For example, a study conducted on technology firms in China demonstrated that the effective utilization of digital technologies to collect, integrate, and deploy resources significantly contributes to improved organizational performance (Wang et al., 2022). Another study in Spain focusing on the service industry revealed that firms’ ability to leverage technology to establish intensive interactions with customers fosters stronger customer loyalty and enhances the overall value creation process (Polo Peña et al., 2014). These findings align with research on digital service and product companies, which indicates that employees’ digital competencies play a crucial role in strengthening the quality of services delivered to customers (Saunila et al., 2019). Based on the discussion above, it can be concluded that digital capability exerts a positive and significant impact on value co-creation, both within educational institutions and across business organizations.

The results further show that Entrepreneurial Leadership, Knowledge Management, and Digital Capability significantly enhance Value Co-Creation within schools, reinforcing the theoretical linkage among RBT, Capability Theory, and Service-Dominant Logic (SDL) (Vargo & Lusch, 2016, 2010; Grönroos & Voima, 2013). From the SDL perspective, school services are driven by the goal of delivering value through meaningful interaction and collaboration with stakeholders (Prahalad & Ramaswamy, 2004; Payne et al., 2008). The integration of leadership, knowledge, and digital competencies facilitates these interactions, fostering shared understanding and mutual value creation between schools and their stakeholders (Ramaswamy & Ozcan, 2018). This provides a novel contribution by extending the application of SDL to the educational entrepreneurship context, addressing a gap in previous international research (Y. Li et al., 2022).

The findings of this study also offer practical guidance for the Ministry of Education regarding strategies to enhance entrepreneurial performance in schools. Specifically, this study highlights the importance of strengthening knowledge management activities and digital capabilities. These insights can serve as a reference for policymakers in formulating educational regulations and policies in Indonesia. In line with Ministry of Education Regulation No. 40 of 2021, schools are mandated to implement entrepreneurship development programs, with performance indicators including the ability to plan, execute, and evaluate such programs effectively. A review of the literature on entrepreneurial performance suggests several additional indicators that can complement existing measures of entrepreneurship development in schools. These include the expansion of diverse entrepreneurship programs, stakeholder satisfaction with these programs, and the overall satisfaction of school stakeholders with improvements in school performance. Incorporating these dimensions can enhance the evaluation of schools’ entrepreneurial performance. To achieve these outcomes, schools need to strengthen their capabilities through targeted training and support aimed at improving knowledge management and digital competencies.

Based on the discussion above, it can be concluded that the findings of this study provide theoretical, practical, and regulatory guidance for education stakeholders seeking to enhance entrepreneurial performance in schools. Improved entrepreneurial performance in schools is likely to stimulate broader entrepreneurial activities within educational institutions, thereby contributing to the advancement and development of schools.

However, contrary to prior studies (Renko et al., 2015; Gupta et al., 2004), the results indicate that Entrepreneurial Leadership does not have a significant direct effect on Entrepreneurial Performance in the educational sector. This suggests that while school leaders demonstrate entrepreneurial behaviors, these may not yet translate into tangible performance outcomes, possibly due to contextual or institutional constraints within the education system (Leithwood & Jantzi, 2005).

Similarly, this study found that Value Co-Creation does not mediate the effects of Entrepreneurial Leadership, Knowledge Management, and Digital Capability on Entrepreneurial Performance. This finding provides new empirical insight, suggesting that in the education sector, collaborative value creation remains limited in its capacity to translate organizational capabilities into measurable entrepreneurial performance (Y. Chen & Lin, 2020).

Despite the significant contributions of this study, several limitations should be acknowledged. First, the methodological approach primarily relied on survey data and statistical modeling, which, while appropriate, may limit the depth of insights into the dynamic processes of entrepreneurial leadership, knowledge management, and digital capability. Second, the determination of respondents was based on the 360-degree feedback approach, involving principals, teachers, and school committees. Although this method strengthens objectivity, it may still be subject to response bias and contextual interpretations. Third, this study was conducted within the Indonesian educational context, which is characterized by specific cultural, institutional, and regulatory settings. As such, caution must be exercised when generalizing these findings to schools in other countries, particularly those with different educational systems, levels of digital adoption, and entrepreneurial ecosystems.

Future research should consider employing mixed-methods approaches, such as combining surveys with in-depth interviews or case studies, to capture more nuanced perspectives. Moreover, cross-country comparative studies could provide richer insights into how contextual differences influence the relationships among entrepreneurial leadership, knowledge management, digital capability, and value co-creation in educational institutions.

6. Conclusions

The primary objective of this study is to investigate the factors that contribute to enhancing entrepreneurial performance and value co-creation within Indonesia’s education sector. Furthermore, this research seeks to explore the mediating role of value co-creation in the relationship among entrepreneurial leadership, knowledge management, digital capability, and entrepreneurial performance. The findings reveal that knowledge management and digital capability significantly improve entrepreneurial performance. In addition, entrepreneurial leadership, knowledge management, and digital capability are confirmed to positively influence value co-creation in the education sector. However, this study demonstrates that value co-creation does not exert a significant effect on entrepreneurial performance and fails to serve as a positive mediator in the relationships between entrepreneurial leadership, knowledge management, digital capability, and entrepreneurial performance.

This study provides a clear theoretical contribution by challenging the universal applicability of Service-Dominant Logic in educational contexts, demonstrating that value co-creation, while significant in business and service industries, does not play a major mediating role in school-based entrepreneurial performance. The results advance Resource-Based Theory and Capability Theory by confirming that intangible resources—knowledge management and digital capability—have a direct and significant impact on performance, even when established mediators are not supported. Additionally, by operationalising and validating these constructs within schools, this study introduces robust measurement tools for future research and highlights the boundary conditions for value co-creation in non-commercial, highly regulated sectors. These theoretical insights enrich the literature on educational entrepreneurship and provide a platform for comparative studies across diverse contexts.

Accordingly, this study offers both policy and practical implications. From a policy perspective, government authorities should give greater attention to the formulation and implementation of laws, regulations, policies, funding mechanisms, and training programs that strengthen schools’ knowledge management and digital capabilities in fostering entrepreneurial performance. The development of schools’ knowledge management and digital capacity can be facilitated through initiatives such as targeted training, structured coaching, and continuous mentoring programs.

This study provides important policy implications, highlighting the need for supportive regulations, adequate funding, and systematic training to strengthen schools’ knowledge management and digital capacity. Despite these contributions, limitations remain, particularly the reliance on survey-based methods, the contextual constraints of the Indonesian education system, and the restricted sample. Future research should adopt mixed methods, expand across educational levels and countries, and incorporate additional variables to achieve a more comprehensive understanding of entrepreneurial performance in educational institutions.