Abstract: The purpose of this study is aimed at examining the effect of distinctive capability mediated by process innovation on MSEs’ business performance of Smoked Skipjack (cakalang) processing in North Sulawesi Province. This research is conducted by censusing and interviewing of 81 MSEs Smoked Skipjack producers. Data are analysed using Quantitative metdhod while SEM-PLS method is used to examine correlation and the infleunce of distinctive capability to business performance. The results show that the distinctive capabilities have a positive and significant effect on business performance when it is mediated partially by process innovation.