CONNECTING THE DOTS: THE SOURCE OF SUSTAINABLE ECONOMIC GROWTH THROUGH THE INTEGRATION OF SMES IN INDUSTRY’S SUPPLY CHAIN

Arnita Rishanty, M. Cahyaningtyas, Rudy Marhastari, Rizki Fitrama, Retno Puspita K. Wicaksono and Rivky Rasyid
Additional contact information
Arnita Rishanty: Bank Indonesia
M. Cahyaningtyas: Bank Indonesia
Rudy Marhastari: Bank Indonesia
Rizki Fitrama: Bank Indonesia
Retno Puspita K. Wicaksono: Bank Indonesia
Rivky Rasyid: Bank Indonesia

No WP/05/2024, Working Papers from Bank Indonesia

Abstract: This study is to identify the benefits of Micro, Small, and Medium Enterprises (MSME) participation in the industry supply chains and to analyze the commitments, enablers, and obstacles that shape MSME involvement in the supply chains of medium and large industries. The integration of MSME into the manufacturing industry supply chain is crucial for advancing economic development and fostering sustainable growth. Currently, the proportion of MSME that have entered supply chains remains low, indicating significant potential for increasing MSME contributions to the manufacturing sector. Building on the results of the mixed method approach comprising Propensity Score Matching (PSM) and Partial Least SquaresStructural Equation Modeling (PLS-SEM) analysis, and case study analysis of two high-value-added sectors (identified through input-output table analysis), rubber and automotive sectors, this study has identified the significance of MSME participation in supply chains, as well as the factors influencing MSME performance. This study suggests that supply chain financing (SCF) plays a critical role in ensuring the commitment of MSME to be part of the industrial supply chains, which in turn positively and significantly affects MSME performance. Supply chain commitment is also suggested to mediate the relationship between SCF and MSME performance. Further, the study identifies challenges faced by MSME and delivers policy recommendations for regulators in supporting MSME

Keywords: Sustainable Growth; MSME; Supply Chain (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024
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