The Impact of Digital Technology Adoption on the Economic Growth of MSMEs in Indonesia

Abstract

This study aims to analyze the influence of digital technology adoption on the economic growth of Micro, Small, and Medium Enterprises (MSMEs) in Indonesia. The background of this research is based on the strategic role of MSMEs in the national economy, as well as the increasing trend of digitalization that influences the way entrepreneurs conduct business. The research method uses a quantitative approach with an explanatory research design. Primary data were obtained by distributing questionnaires to 400 MSMEs across five provinces, while secondary data were obtained from official publications and related literature. Data analysis was performed using multiple linear regression with the help of statistical software. The results of the study indicate that the level of digital technology adoption among MSMEs is relatively high, especially in the use of e-commerce, social media, and digital payment systems, although the use of business management applications is still at a moderate level. The adoption of digital technology has a positive and significant effect on the economic growth of MSMEs, with a coefficient of determination (R²) of 0.562, which means that 56.2% of the variation in MSME economic growth can be explained by the level of digital technology adoption. The indicator with the greatest influence is the use of e-commerce, followed by social media, digital payment systems, and business management applications. The study concluded that digitalization plays a crucial role as a catalyst in increasing turnover, expanding market reach, increasing workforce size, and boosting profits for MSMEs. The study recommends improving digital literacy, expanding access to technology financing, and cross-sector collaboration to sustainably strengthen the MSME digital ecosystem.