Analysis of the effect of digital transformation strategy on business sustainability of micro, small, and medium enterprises (MSMEs) in Indonesia

Abstract

The Micro, Small and Medium Enterprises (MSMEs) sector in Indonesia is one of the main drivers of the Indonesian economy which has contributed significantly to the national Gross Domestic Product (GDP). The COVID-19 pandemic provides the momentum for MSMEs actors in Indonesia to carry out digital transformation in line with the social distancing policies for suppressing the spread of COVID-19. This study aims to determine the influence of a digital transformation strategy consisting of customers, competition, data and innovation on the sustainability of MSME business in Indonesia. The object of this research is MSMEs in Indonesia that have used digital in their business/business processes. By using a convenience sampling technique, 350 respondents were obtained. This amount has met the minimum requirements for taking research samples. This study has been tested for validity and reliability before simple and multiple regression analysis was performed. The results of this study indicate that customers, competition, innovation, and data each have an effect on the sustainability of MSME businesses in Indonesia. The results of the coefficient of determination show that customers, competition, data and innovation together affect business sustainability by 72.9% while the remaining 27.1% is influenced by other variables. The results of the t-test show that customers, competition, data and innovation have a significant effect on business sustainability. Academically and practically, this quantitative research can be used as a reference for further research and can involve various parties to get an overview of the overall profile of MSMEs in Indonesia so that they can provide valuable input for improving the quality of MSMEs in Indonesia.