Abstract
Micro, small and medium enterprises (MSME – Indonesian: UMKM – Usaha Micro, Kecil dan Menengah) are the key to increase growth, create employment, act as the source of people’s income, to fulfil the need of goods and services, to increase the added values which eventually influence the economic growth. This research is aimed to explain how business environment and capability influence the competitive advantage which plays an important role that determines the business performance of MSME. The total sample able to be collected with web-based design is 56 MSME/UMKM from all over Indonesia. The analysis technique used is structural equation modeling (SEM). The study proves that business environment does not significantly influence the business performance of MSME/UMKM. However, this variable contributes significant indirect influence with a greater level than its direct influence. The finding indicates that improvement in business environment will be able to boost the business performance if it is combined with the improvement in competitive advantage of the MSME/UMKM.
Highlights
Competitive advantage shall determine the economic productivity level of a country and a high level of productivity reflects high level of competitiveness; while high level of competitiveness has the potential to encourage high level of economic growth that eventually shall increase the level of people’s welfare [1]
MSME play an important role in Indonesian economy, that can be observed from: their contribution towards the Gross Domestic Product (GDP) which is 61.41%, the number of MSME which raised from 1.67% to 3.1% in early 2017, their contribution towards the economy growth which reached up to 99%, and their contribution towards employment which absorbed 96.71% of labor force [3]
Based on the identification of secondary data obtained from experts in economy, it can be determined that there are some obstacles to developing MSME in Indonesia which cover: inability to accommodate the development of macro economy indicators, lack of technology application, the change of global market, capital, lack of knowledge about marketing strategy related to branding, insufficient promotion, problem in setting up the market segment, low quality products resulted, limitation in human resources and their quality, and lack of innovation
Summary
Competitive advantage shall determine the economic productivity level of a country and a high level of productivity reflects high level of competitiveness; while high level of competitiveness has the potential to encourage high level of economic growth that eventually shall increase the level of people’s welfare [1]. Based on the identification of secondary data obtained from experts in economy, it can be determined that there are some obstacles to developing MSME in Indonesia which cover: inability to accommodate the development of macro economy indicators, lack of technology application, the change of global market, capital, lack of knowledge about marketing strategy related to branding, insufficient promotion, problem in setting up the market segment, low quality products resulted, limitation in human resources and their quality, and lack of innovation. It is assumed that MSME have not been able to respond and adjust to dynamic business environment and to improve their business capability optimally, so that they are not yet able to create competitive advantage which eventually influence their business performance.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International Journal of Engineering & Technology
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
