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Abstract
Micro, Small and Medium Enterprises are one of the drivers of national economic growth, because of their ability to absorb workers equal to 95% with a total investment of 60.4%. This study aims to examine the effect of capital capability, empowerment, and product innovation on the competitiveness of micro, small and medium enterprises. And the role of product innovation as a mediating variable in the indirect influence between the coaching program and capital on the competitiveness of micro, small and medium enterprises in Aceh. Study designs a Quantitative Research. This research was conducted on micro, small and medium enterprises (MSMEs) in Aceh Province, Indonesia. The population in this study were micro, small and medium enterprises (MSMEs). The research sample was determined by purposive sampling, with a sample size of 272 SMEs. While the data analysis tool usesStructural Equation Modeling (SEM) Amos to test the effect between exogenous variables and endogenous variables. Pdirect effect test found that capital has no effect on product innovation by -0.035, P-Value 0.754 (Not supported H1). Empowerment has a significant effect on product innovation by 0.249, p-value 0.030 (Supported H2). Capital has a significant effect on the competitiveness of SMEs by 0.220, p-vale 0.014 (Supported H3). Empowerment has a significant effect on MSME competitiveness by 0.542, and p-value 0.000 (Supported H4), and product innovation has a significant effect on MSME competitiveness by 0.274 and p-value 0.000 (supported H5). To test the indirect effect using the Sobel test calculator, it was found that product innovation variables were able to partially mediate the relationship between capital and empowerment on the competitiveness of SMEs. The results of the study indicate that the Empowerment and Product Innovation variables have a significant effect on the competitiveness of MSMEs both directly and indirectly, except for the Capital variable which is found to be insignificant to Product Innovation. Finally, the researcher concludes that the competitiveness of micro, small and medium enterprises in Aceh is determined by the factors of capital capability, empowerment program and product innovation.
Highlights
Indonesia is currently entering the demographic bonus phase, where the proportion of young people currently amounting to more than 25 percent of the total of about 270 million Indonesians combined with 59.2 million Micro, Small, Medium Enterprises (MSMEs) units that make a big contribution to the National Gross Domestic Product (GDP) (Central Bureau of Statistics (BPS), 2020)
Indonesia's entrepreneurial growth until 2020 is 3.47% or Indonesia is in position 94 out of 137 countries in the world(Adam, Ibrahim, Ikramuddin, & Syahputra, 2020)
Capital is an investment in short-term assets or investment in current assets
Summary
Indonesia is currently entering the demographic bonus phase, where the proportion of young people currently amounting to more than 25 percent of the total of about 270 million Indonesians combined with 59.2 million Micro, Small, Medium Enterprises (MSMEs) units that make a big contribution to the National Gross Domestic Product (GDP) (Central Bureau of Statistics (BPS), 2020). The high rate of population growth is not proportional to the high growth of entrepreneurship. Indonesia's entrepreneurial growth until 2020 is 3.47% or Indonesia is in position 94 out of 137 countries in the world(Adam, Ibrahim, Ikramuddin, & Syahputra, 2020). Magazine's, 2021), Entrepreneurship Index Indonesia in 2021 ranks 45th as the most entrepreneurial country in the world out of 100 surveyed countries, with the ability to access capital of 226.52 and openness for business of 0.44 percent. For the category of the most innovative country, Indonesia is ranked 3.95. This percentage is much smaller than other Asean countries. On average, developed countries have an entrepreneurial growth rate of 14 percent
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