Abstract
Small industries are growing rapidly in business units and employment, but are still very low contributing to GDP compared to medium and large industries with a smaller share of business units and labor. This has an impact on the widening gap in labor productivity between small industries and large industries and competitiveness in both domestic and global markets. This condition is very worrying considering that the small industrial sector is highly expected to be the engine of growth because of its significant role in employment. Data used secondary data in the form of provincial panel data in Indonesia from 2010-2015. The analysis uses panel regression method with two equations for small industry competitiveness and economic growth in Indonesia. Based on the Hausman test obtained the right model is the common effect. The results show that in the small industry competitiveness equation, production value and labor productivity have a positive effect on the competitiveness of small industries, labor wage variables have a negative effect, while technology does not affect the competitiveness of small industries in Indonesia. The economic growth equation obtained by the results of competitiveness, investment, and small industrial business units have a positive effect on economic growth in Indonesia.
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