Digital Transformation and Profitability of MSME Manufacturing Sec-tor in Indonesia

Abstract

Digital transformation by MSMEs in developing countries is not as good as in developed countries. MSMEs in developing countries like Indonesia have many limitations, therefore it is necessary to study the use of digital technology by MSMEs and its impact on company performance. This research aims to analyze the influence of digital transformation on the performance of MSMEs. The sample for this research was MSME companies in the manufacturing sector which were taken using a purposive sampling technique and 305 MSMEs were obtained as samples. The analysis method uses logistic regression analysis. The results of data analysis in this research show that: (a) in micro companies, digitalization of production and logistics and digital value chains, big data has a significant effect on profitability, (b) in small companies, digitalization of production and logistics and digital value chains have a very significant effect on profitability, (c) in medium-sized companies, digitalization of the value chain has a significant effect on profitability. Meanwhile, artificial intelligence does not have a significant effect on micro, small or medium companies. This study contributes to a better understanding of the use of digitalization by MSMEs and its impact on MSME performance in developing countries. Different from previous studies, this study has included artificial intelligence variables in the model and was conducted in Indonesia as a developing country.