The effect of innovation capability and digital technology on the profitability of MSMEs in the Covid-19 pandemic time

Abstract

The Covid-19 pandemic has devastated the health aspect and slumping economic impact. The government is having economic difficulties in 2020, especially for MSMEs (Micro, Small and Medium Enterprises). Many of them are unable to pay their debts to third parties, let alone expect a profit. Unfortunately, because MSMEs are the spearhead of the community's economy, especially in villages. In these conditions, the ability to innovate on products is more important to do, to meet market demand. Marketing capabilities using digital technology can also help broader marketing at competitive prices. The purpose of this study was to see the effect of the profitability of MSMEs during the Covid-19 pandemic, with the innovation capability variables and digital technology as independent variables. The method used is working on a questionnaire and testing the hypothesis using assumption tests and multiple linear regression. The results showed that partially the innovation capability affected the profitability of MSMEs. MSMEs that innovate to create products needed during a pandemic have high profitability. Digital technology does not affect the profitability of MSMEs. It happens because people do not usually use financial technology and lack confidence in the marketplace. Simultaneously the capabilities of innovation and technology affect MSMEs.