The Digital Transformation: Exploring Innovation’s Impact on SME Competency and Sustainability in the Digital Age

Faisol Faisol (), Sigit Puji Winarko and Sri Aliami
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Faisol Faisol: University of Nusantara PGRI Kediri
Sigit Puji Winarko: University of Nusantara PGRI Kediri
Sri Aliami: University of Nusantara PGRI Kediri

A chapter in Proceedings of the 4th Business Innovation Sustainability and Technology International Conference (BISTIC 2024), 2024, pp 167-174 from Springer

Abstract: Abstract This research investigates the role of innovation in diving the business competency and relational competency on the sustainability of SMEs in the digital era. We use data from shared questionnaires distributed to 152 owners of small and medium businesses in clusters located in East Java Indonesia. To estimate the hypothesized relationships, this reset used PLS-SEM. The result showed the business competency has no direct effect on firm sustainability, it does have a significant impact on firm sustainability through innovation. These results suggest that when developing appropriate policies for SMEs, the role of innovation is as a potential intermediary in boosting business capabilities toward the sustainability of SMEs, and it must be considered rightly to address the challenges associated with enterprise internationalization. In short, the development of innovation for the right business competency is critical for SMEs to compete on a global scale. In this study, we recommend that SMEs prioritize innovation as a key intermediary in enhancing business competency for long-term sustainability. Policies should support innovation-driven business models, sector-specific innovation needs, and provide financial incentives for R&D and technology adoption. Collaboration with innovation hubs and promoting digital literacy are crucial for fostering a culture of innovation. Networking opportunities should also be encouraged to strengthen relational competency, enabling SMEs to compete globally.

Keywords: Business competency; Innovation; Micro small medium enterprises; Relational competency; JEL Classification: O310; O340; O350; M210 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.2991/978-94-6463-576-8_15

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