Micro, small, and medium enterprises (MSMEs): The emerging market analysis

Fatimah Fatimah,Fitriya Fauzi,Abid Djazuli

doi:10.5267/j.ac.2021.5.019

Abstract

This study aims to analyse the factors affecting the Micro, Small, and Medium Enterprises in the province of South Sumatra, Indonesia. Data of 100 MSMEs were collected through questionnaires in the 15 regencies/cities in South Sumatra. The statistical analysis used was Structural Equation Modelling (SEM) processed through AMOS. The results evidence that the external factors of capital support, business partners, and infrastructure directly have no direct effects but indirectly affect the performance of MSMEs in South Sumatra. Also, the availability of resources and environmental conditions; and the capability of business owners and employees indirectly affect the performance of MSMEs in South Sumatra. Lastly, the use of technology and research impact the performance of MSMEs in South Sumatra directly and indirectly through the availability of resources and environmental conditions and business owners and employees' capability. Theoretically, this study expands the MSMEs literature by discussing factors (i.e., external and internal) affecting MSMEs' performance holistically. Practically, this study is beneficial for the government, practitioners, and policymakers.

Highlights

Micro, Small, and Medium Enterprises (MSMEs) proliferate in Indonesia, in South Sumatra
The availability of resources and environmental conditions; and the capability of business owners and employees indirectly affect the performance of MSMEs in South Sumatra
This study proposes the hypotheses as follows: H1: External factors of capital support, business partners, and infrastructure affect the business performance

Summary

Introduction

Small, and Medium Enterprises (MSMEs) proliferate in Indonesia, in South Sumatra. Based on the Indonesian Central Statistics Agency (BPS) data in 2015, MSMEs contributed 58.92% to the Gross Domestic Product (GDP) and absorbed 97.30% of the country's total workforce. According to Alyas and Rakib (2017), various internal factors are hindering MSMEs growth. These constitute capital capabilities, weak management systems, the quality and quantity of human resources, less intensive marketing activities, and limited production means. According Utami and Lantu (2014), there are six primary variables shaping MSMEs' competitiveness They are the availability and conditions of the business environment, policy and infrastructure, research and technology, financial support and partnerships, and performance

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