The role of ICT services on indonesian Small to Medium Enterprise productivity

Abstract

Small to Medium Enterprises (SMEs) are considered collectively as a major economic player and a potential source of national, regional and local economic growth. Productivity growth of SMEs individually does not compare with that for large enterprises, but collectively this is a significant economic factor. Information and Communication Technology (ICT) is one of the key growth engines for SMEs, in term of facilitating business processes, even though the adoption of ICT by SMEs may not be as rapid as one would expect, especially in developing countries. This study investigates the role of ICT services to SME productivity using a study case carried out in Indonesia. An outsourced ICT service model that includes fixed telephone, mobile, Internet, Cloud computing and other managed services has advantages that can be identified and harnessed to grow economic activity amongst SMEs. The motivation for using ICT services capital as an explanatory variable is that the ICT service model is changing from principally an in-house service model to an increasingly outsourced service model. A research framework has been adopted that incorporates the Cobb-Douglass production function and considers ICT service capital as an explanatory variable that has not been accounted for by previous studies found in the literature. This research provides an empirical analysis outcome by investigating the link between ICT services and SME productivity. This paper presents initial results of a field survey conducted in Jakarta and Bandung.