Enabling management control in improving the performance of SMEs

Tubagus Ismail,Nurul Ummi,Meutia Meutia

doi:10.5267/j.msl.2019.6.009

Abstract

This study aimed to investigate the effect of management control system enabling with capabilities that can improve the performance of SMEs. This study was conducted among the managers of SMEs of local food products in Banten Province, Indonesia. The number of respondents in this study was 85 SME managers. This study used structural equation modeling as an analytical tool and PLS Smart software to process the data. The findings of this study show that there was a positive effect of the use of enabling management control system (MCS) on creativity; there was a positive and significant effect of the use of Enabling MCS on cost efficiency; there was a positive and significant effect of the use of Enabling MCS on performance; there was a positive and significant effect of creativity on innovation; there was a positive and significant effect of cost efficiency on performance; and finally there was a positive and significant effect of innovation on performance. The implication of this study is that it can provide a choice of control system for SME management, which up to now still uses conventional control system. The use of Enabling MCS can create a capability for the managers of SMEs of local food products to win the competition. This is due to the uniqueness of Enabling MCS that can increase creativity and also cost efficiency

Highlights

Small and Medium Enterprises (SMEs) are a manifestation of a people-driven economy, which is considered to have a strategic role and potential in mobilizing the National economy
This study aimed to investigate the effect of management control system enabling with capabilities that can improve the performance of SMEs
The findings of this study show that there was a positive effect of the use of enabling management control system (MCS) on creativity; there was a positive and significant effect of the use of Enabling MCS on cost efficiency; there was a positive and significant effect of the use of Enabling MCS on performance; there was a positive and significant effect of creativity on innovation; there was a positive and significant effect of cost efficiency on performance; and there was a positive and significant effect of innovation on performance

Summary

Introduction

Small and Medium Enterprises (SMEs) are a manifestation of a people-driven economy, which is considered to have a strategic role and potential in mobilizing the National economy. The development of SMEs in Indonesia faces various constraints including lack of quality resources, product marketing, raw materials and capital (Meutia, 2017). These constraints have resulted in the less optimal competitiveness and the performance of SMEs. One way to improve the performance of SMEs is to improve the capabilities of SMEs through appropriate strategies such cost reduction. Creativity and innovation are recognized as the main capabilities which could may contribute significantly to the performance of the firms (Cefis & Marsili, 2006; Matolcsy & Wyatt, 2008). The role of innovation, creativity and strategy will not be optimal without the support and role of good management control system (MCS) (Ismail & Ghozali, 2015)

Objectives

Methods

Findings

Conclusion