Digital adoption, business performance, and financial literacy in ultra-micro, micro, and small enterprises in Indonesia

Yoga Affandi, Masagus M Ridhwan, Irwan Trinugroho and Danny Hermawan Adiwibowo

Research in International Business and Finance, 2024, vol. 70, issue PB

Abstract: This study investigates the factors affecting digital adoption by ultra-micro, micro, and small enterprises (UMSEs) based on a survey of 5035 UMSEs in 17 major provinces in Indonesia. We use the survey data to construct a digital adoption index to evaluate the variations in digital adoption in the five business processes of e-procurement, POS, e-marketing, e-commerce, and digital payment. This index not only identifies whether a firm has adopted digital technology but also considers the dimensions of use to measure the level of adoption more precisely. Using the primary data, we employ a simple regression model, and the results demonstrate that owner demographic characteristics, firm-specific factors, business environment, connectivity infrastructure quality, and culture are associated with disparities in digital adoption by UMSEs. Our findings also reveal a positive and significant correlation between digital adoption on business performance. Based on a two-stage least squares (2SLS) model, we found strong evidence of the impact of digital adoption on UMSE owners’ level of financial literacy. The latter result suggests that improving digital adoption among UMSEs could enhance their financial literacy. Overall, these findings confirm the vital role of digital transformation for UMSEs to achieve growth and competitiveness in the global market, which requires robust support from policymakers.

Keywords: Digital Adoption; Ultra-Micro; Micro and Small Enterprises; Business Performance; Financial Literacy (search for similar items in EconPapers)
JEL-codes: L25 O33 R11 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: DIGITAL ADOPTION, BUSINESS PERFORMANCE, AND FINANCIAL LITERACY IN ULTRA-MICRO, MICRO, AND SMALL ENTERPRISES IN INDONESIA (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:70:y:2024:i:pb:s0275531924001697

DOI: 10.1016/j.ribaf.2024.102376

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