THE INFLUENCE OF FINANCIAL LITERACY INTEGRATION AND ORGANIZATIONAL DIVERSITY ON MSME DEVELOPMENT THROUGH INNOVATION CAPABILITY AS AN INTERVENING AND EXTERNAL ENVIRONMENTAL SUPPORT AS A MODERATION IN KULONPROGO
DOI:
https://doi.org/10.58738/manager.v4i3.1414Keywords:
Financial Literacy, Organizational Diversity, Innovation Capability, External Environmental Support, MSME DevelopmentAbstract
Micro, Small, and Medium Enterprises (MSMEs) have a strategic role in the regional economy, but in Kulon Progo Regency they still face obstacles, namely low financial literacy and management of organizational diversity. Data from the Cooperatives and SMEs Office shows that around 62% of MSMEs do not have standard financial records and only 48% are able to develop product innovations sustainably. This phenomenon has an impact on low competitiveness and business growth. This study aims to test and empirically prove the effect of the integration of financial literacy and organizational diversity on the development of MSMEs through innovation capabilities as an intervening variable and external environmental support as a moderating variable. The research method uses a quantitative approach with a survey method. The population in this study is all MSMEs including (culinary, crafts, trade, and services) with a total of 1300 MSMEs. While the sample in the study uses the Slovin formula, the number of samples is 306 MSMEs. The results of the study indicate that financial literacy and organizational diversity have a positive and significant effect on innovation capabilities. Innovation capability has been shown to mediate this influence on MSME development. Furthermore, external environmental support strengthens the relationship between innovation capability and MSME development. The theoretical implications of this study enrich the literature related to the integration of internal and external factors in MSME development. Practically, the research results provide recommendations for local governments to improve financial literacy training and create a business ecosystem that supports MSME innovation.
References
Barney J. 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management. Vol 17(1).
Calantone RJ, Cavusgil ST, Zhao Y. 2002. Learning Orientation and Firm Innovation Capability. Industrial Marketing Management. Vol 31(6).
Clarkson M. 1995. Stakeholder Framework. Academy of Management Review. Vol 20(1).
Cox T. 2001. Creating the Multicultural Organization. Jossey-Bass. San Francisco.
Creswell JW. 2014. Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. Sage Publications. California.
Donaldson T, Preston LE. 1995. Stakeholder Theory. Academy of Management Review. Vol 20(1).
Drucker P. 1985. Innovation and Entrepreneurship. Harper & Row. New York.
Freeman RE. 1984. Strategic Management: A Stakeholder Approach. Pitman. Boston.
Ghozali I. 2021. Structural Equation Modeling dengan PLS. UNDIP Press. Semarang.
Hair JF et al. 2020. Multivariate Data Analysis. Pearson. London.
Henseler J. 2009. The Use of Partial Least Squares Path Modeling. Advances in International Marketing. Vol 20
Hurley RF, Hult GT. 1998. Innovation, Market Orientation. Journal of Marketing. Vol 62(3).
Kulon Progo Cooperative and SMEs Office. 2023. Kulon Progo SMEs Report. Yogyakarta.
Likert R. 1932. A Technique for the Measurement of Attitudes. Archives of Psychology. Vol 140.
Lusardi A, Mitchell OS. 2014. Financial Literacy and Economic Decision Making. Journal of Economic Literature. Vol 52(1).
Lusardi A, Mitchell OS. 2014. The Economic Importance of Financial Literacy. J Econ Lit. Vol 52(1).
Malhotra NK. 2010. Marketing Research. Pearson. New Jersey.
Ministry of Communication and Informatics of the Republic of Indonesia. 2023. Digital Transformation of MSMEs. Jakarta.
Ministry of Cooperatives and SMEs of the Republic of Indonesia. 2022. Development of Indonesian MSME Data. Jakarta.
Mitchell RK. 1997. Stakeholder Identification. Academy of Management Review. Vol 22(4).
North DC. 1990. Institutions, Institutional Change and Economic Performance. Cambridge University Press. Cambridge.
OECD. 2021. SME Digitalisation to “Build Back Better”. Paris: OECD Publishing.
Oseifuah EK. 2010. Financial Literacy and Entrepreneurship. African Journal of Economic and Management Studies. Vol 1(2).
Oseifuah EK. 2010. Financial Literacy and Youth Entrepreneurship. Afr J Econ Manag Stud. Vol 1(2).
Peteraf MA. 1993. The Cornerstones of Competitive Advantage. Strategic Management Journal. Vol 14(3).
Porter ME. 2008. Competitive Advantage of Nations. Free Press. New York.
Remund DL. 2010. Financial Literacy Explicated: The Case for a Clearer Definition. Journal of Consumer Affairs. Vol 44(2).
Robbins SP, Judge TA. 2017. Organizational Behavior. 17th ed. Pearson. New York.
Schaltegger S, Wagner M. 2017. Managing Sustainability Performance. Environ Strat Bus. Vol 26(1).
Schumpeter JA. 1934. The Theory of Economic Development. Harvard University Press. Cambridge.
Sekaran U, Bougie R. 2016. Research Methods for Business. Wiley. UK.
Stahl GK. 2010. Cultural Diversity. Journal of International Business Studies. Vol 41(4).
Sugiyono. 2019. Metode Penelitian Kuantitatif. Alfabeta. Bandung.
Teece DJ. 2007. Dynamic Capabilities and Strategic Management. Strategic Management Journal. Vol 28(13).
Teece, David J. (2007). Dynamic Capabilities and Strategic Management. Strategic Management Journal, 28(13), 1319–1350..
UNDP. 2021. Sustainable Development and SMEs. New York.
Wernerfelt B. 1984. A Resource-Based View of the Firm. Strategic Management Journal. Vol 5(2).
Williams KY, O’Reilly CA. 1998. Demography and Diversity in Organizations. Research in Organizational Behavior. Vol 20.
World Bank. 2020. Small and Medium Enterprises (SMEs) Finance. Washington DC: World Bank.
Zahra SA, George G. 2002. Absorptive Capacity. Academy of Management Review. Vol 27(2).
