Model for Increasing the Economic Competitiveness of MSMEs in the Creative Industry Sector in Indonesia

Abstract

This study predicts and analyzes the mediating role of innovation capability (IC) on the relationship between digital transformation (DT) and economic competitiveness (CP) of SMEs, by proposing model construction. The survey method was carried out by distributing research instruments to 98 respondents, the collected data was used to analyze the relationship between digital transformation, innovation ability and competitiveness, also used to test hypotheses. Evaluation of predictions through structural equation models with partial least squares-structural equation modeling (PLS-SEM). The results of model measurement and the results of the evaluation of model suitability show that model suitability is achieved and guarantees model suitability. The results of the structural model path analysis show that all hypotheses are accepted, and IC has a mediating effect on the effect of digital transformation on the economic competitiveness of MSMEs. There is an important component that must be considered to strengthen the contribution of DT and IC to the improvement of CP, namely a set of competencies and resources that must be prepared. A model of increasing the economic power of MSMEs in the creative industry sector based on innovation and digital transformation capabilities involving a set of competencies including digital competencies of human resources and economic resources as fundamental inputs that strengthen them, becomes this novelty to fill the existing gap. The contribution of this research broadens the horizons on the effectiveness of highly competitive businesses in this era, where digital transformation capabilities, digital skills and innovation capabilities must be prepared.