Innovation and Internationalization in MSMEs: The Influence of Digital Literacy
DOI:
https://doi.org/10.59890/ijgsr.v4i4.205Keywords:
Innovation, Digital Literacy, Internationalization, Msmes, Market ExpansionAbstract
This study examines the effects of innovation and digital literacy on the internationalization of micro, small, and medium enterprises (MSMEs). The study is motivated by the increasing importance of internal capabilities in helping MSMEs expand beyond domestic markets in a rapidly digitalizing business environment. Using a quantitative explanatory approach, this research was conducted among MSMEs associated with PT Setera’ Ebumi Sumekar. Data were collected from 80 respondents through questionnaires and analyzed using multiple linear regression, supported by validity, reliability, and classical assumption tests. The results show that innovation has a positive and significant effect on MSME internationalization. Digital literacy also has a positive and significant effect, with a slightly stronger contribution than innovation. Simultaneously, both variables significantly influence internationalization, indicating that innovation and digital literacy are important drivers of broader market expansion. These findings suggest that MSME internationalization depends not only on the ability to create business value through innovation but also on the capability to use digital technologies effectively for communication, information access, and market development. This study contributes to the literature by emphasizing the complementary role of innovation and digital literacy in supporting MSME internationalization
References
Aggarwal, A., & Joshi, N. (2024). MSMEs' innovation: A barrier approach. Journal of Small Business and Enterprise Development, 31(3), 552-573. https://doi.org/10.1108/JSBED-07-2023-0304
Ben Ghrbeia, S., & Alzubi, A. (2024). Building micro-foundations for digital transformation: A moderated mediation model of the interplay between digital literacy and digital transformation. Sustainability, 16(9), 3749. https://doi.org/10.3390/su16093749
Coco, N., Colapinto, C., & Finotto, V. (2024). Fostering digital literacy among small and micro‐enterprises: digital transformation as an open and guided innovation process. R&D Management, 54(1), 118-136. https://doi.org/10.1111/radm.12645
García-Vidal, G., Sánchez-Rodríguez, A., Guzmán-Vilar, L., Martínez-Vivar, R., & Pérez-Campdesuñer, R. (2025). Exploring MSME Owners' Expectations of Data-Driven Approaches to Business Process Management. Systems, 13(4), 265. https://doi.org/10.3390/systems13040265
Gong, S., Sun, Z., Wang, B., & Yu, Z. (2024). Could digital literacy contribute to the improvement of green production efficiency in agriculture?. Sage Open, 14(1), 21582440241232789. https://doi.org/10.1177/21582440241232789
Ha, S., & Kim, S. (2024). Developing a conceptual framework for digital platform literacy. Telecommunications Policy, 48(3), 102682. https://doi.org/10.1016/j.telpol.2023.102682
Hans, V. B., & Sastry, N. S. K. (2025). The role of micro, small, and medium enterprises (MSMEs) in promoting inclusive growth and sustainable development in Karnataka. Int J Manag Stud Res, 13(02), 26-35. https://doi.org/10.20431/2349-0349.1302003
Haynes-Brown, T. K. (2023). Using theoretical models in mixed methods research: An example from an explanatory sequential mixed methods study exploring teachers' beliefs and use of technology. Journal of mixed methods research, 17(3), 243-263. https://doi.org/10.1177/15586898221094970
Hoang, D. V., Duy, H. A., Thuy, D. T., Giang, D. T., Chau, V. N. M., Ngoc, N. L. M., & Quynh, V. H. (2025). Digital capabilities and competitive advantage in the context of technological uncertainty: Evidence from emerging market SMEs. International Journal of Innovation Management, 29(03n04), 2550018. https://doi.org/10.1142/S1363919625500185
Ibrahim, M., & Aduah, E. W. (2025). Digital literacy, digital intelligence and small and medium enterprises'(SMEs) sustainability: The mediating role of digital technology usage. Information Development. https://doi.org/10.1177/02666669251335001
Inegbedion, H. E., Thikan, P. R., David, J. O., Ajani, J. O., & Peter, F. O. (2024). Small and medium enterprise (SME) competitiveness and employment creation: the mediating role of SME growth. Humanities and Social Sciences Communications, 11(1), 1-10. https://doi.org/10.1057/s41599-023-02434-y
Judijanto, L., Utami, E. Y., Apriliani, D., & Rijal, S. (2024). A holistic review of MSME entrepreneurship in Indonesia: The role of innovation, sustainability, and the impact of digital transformation. International Journal of Business, Law, and Education, 5(1), 119-132. https://doi.org/10.56442/ijble.v5i1.355
Kabakus, A. K., Bahcekapili, E., & Ayaz, A. (2025). The effect of digital literacy on technology acceptance: An evaluation on administrative staff in higher education. Journal of Information Science, 51(4), 930-941. https://doi.org/10.1177/01655515231160028
Kastelli, I., Dimas, P., Stamopoulos, D., & Tsakanikas, A. (2024). Linking digital capacity to innovation performance: The mediating role of absorptive capacity. Journal of the Knowledge Economy, 15(1), 238-272. https://doi.org/10.1007/s13132-022-01092-w
Kreiterling, C. (2023). Digital innovation and entrepreneurship: A review of challenges in competitive markets. Journal of Innovation and Entrepreneurship, 12(1), 49. https://doi.org/10.1186/s13731-023-00320-0
Kurniasih, J., Abas, Z. A., Asmai, S. A., & Wibowo, A. B. (2023). System dynamics approach in supporting the achievement of the sustainable development on MSMEs: a collection of case studies. International Journal of Advanced Computer Science and Applications, 14(6). https://doi.org/10.14569/IJACSA.2023.01406106
Lim, W. M. (2025). What is quantitative research? An overview and guidelines. Australasian Marketing Journal, 33(3), 325-348. https://doi.org/10.1177/14413582241264622
Loo, M. K., Ramachandran, S., & Raja Yusof, R. N. (2023). Unleashing the potential: Enhancing technology adoption and innovation for micro, small and medium-sized enterprises (MSMEs). Cogent Economics & Finance, 11(2), 2267748. https://doi.org/10.1080/23322039.2023.2267748
Marín, V. I., & Castaneda, L. (2023). Developing digital literacy for teaching and learning. In Handbook of open, distance and digital education (pp. 1089-1108). Singapore: Springer Nature Singapore. https://doi.org/10.1007/978-981-19-2080-6_64
Naayif, A., Swacha, J., Saeed, S., & Śpiewak, R. (2025). Digital literacy as a mediator in the link between digital marketing adoption and business performance: insights from micro and small enterprises (MSEs) in the Maldives. Asia-Pacific Journal of Business Administration, 1-20. https://doi.org/10.1108/APJBA-12-2024-0688
Nasiri, M., Saunila, M., Ukko, J., Rantala, T., & Rantanen, H. (2023). Shaping digital innovation via digital-related capabilities. Information Systems Frontiers, 25(3), 1063-1080. https://doi.org/10.1007/s10796-020-10089-2
Ojobo, C. A., Orga, C. C., & Okechukwu, E. U. (2023). Impact of digital literacy on the performance of small-scale business in Enugu State. Advance Journal of Business and Entrepreneurship Development, 7(1), 57-78.
Polizzi, G. (2025). Digital literacy and strategic (dis) engagement: examining how functional and critical digital literacy shapes participation. Information, Communication & Society, 28(14), 2483-2502. https://doi.org/10.1080/1369118X.2025.2452282
Probohudono, A. N., Suhardjanto, D., Aligarh, F., Chayati, N., & Putra, A. A. (2025). Navigating MSMEs' performance through innovation and digital IT capabilities in business strategy. Social Sciences & Humanities Open, 12, 101810. https://doi.org/10.1016/j.ssaho.2025.101810
Purnomo, S., & Purwandari, S. (2025). A comprehensive micro, small, and medium enterprise empowerment model for developing sustainable tourism villages in rural communities: A perspective. Sustainability, 17(4), 1368. https://doi.org/10.3390/su17041368
Rakib, M. (2024). Impact of digital literacy, business innovation, competitive advantage on the existence of SMEs: A quantitative study in Makassar City, Indonesia. Quality-Access to Success, 25(198), 277-283. https://doi.org/10.47750/QAS/25.198.30
Reddy, P., Chaudhary, K., & Hussein, S. (2023). A digital literacy model to narrow the digital literacy skills gap. Heliyon, 9(4). https://doi.org/10.1016/j.heliyon.2023.e14878
Rizkita, M. A., Winarno, A., & Suwono, H. (2025). Harnessing Sustainability and Innovation in Micro, Small, and Medium Enterprises: Strategies and Challenges for Competitive Advantage. International Journal of Sustainable Development & Planning, 20(6). https://doi.org/10.18280/ijsdp.200630
Rosyidiana, R. N., & Narsa, I. M. (2024). Micro, small, and medium-sized enterprises (MSMEs) during the post-pandemic economic recovery period: digitalization, literation, innovation, and its impact on financial performance. Cogent Business & Management, 11(1), 2342488. https://doi.org/10.1080/23311975.2024.2342488
Rumanti, A. A., Daryanto, Y., Amelia, M., Rizaldi, A. S., Zulkarnain, I., & Andrawina, L. (2025). The role of organizational and stakeholder factors in strengthening digital literacy and communication for edu-tourism. Journal of Open Innovation: Technology, Market, and Complexity, 100618. https://doi.org/10.1016/j.joitmc.2025.100618
Soesetio, Y., Rudiningtyas, D. A., Rakhmad, A. A. N., & Wiliandr, R. (2024). Entrepreneurial orientation, innovation, competitiveness, and performance of Ultra-Micro and micro enterprises in Indonesia. Global Business & Finance Review, 29(10), 55. https://doi.org/10.17549/gbfr.2024.29.10.55
Sudirjo, F., Zaini, M., Rahmanto, B. T., & Juminawati, S. (2025). The Influence of Managerial Competence, Innovation, and Market Orientation on the Performance of Micro, Small and Medium Enterprises (MSMEs). West Science Journal Economic and Entrepreneurship, 3(02). https://doi.org/10.58812/wsjee.v3i02.1898
Susanti, E., Mulyanti, R. Y., & Wati, L. N. (2023). MSMEs performance and competitive advantage: Evidence from women's MSMEs in Indonesia. Cogent Business & Management, 10(2), 2239423. https://doi.org/10.1080/23311975.2023.2239423
Suyatna, H., Kafaa, K. A., Budiono, M. F., Firdaus, R. S. M., & Wibowo, I. A. (2026). Digitalising Traditional Markets: Challenges and Opportunities for Micro, Small, and Medium Enterprises (MSMEs) in Indonesia. Jurnal Ilmu Sosial dan Ilmu Politik, 29(3), 265-277. https://doi.org/10.22146/jsp.104248
Tinmaz, H., Fanea-Ivanovici, M., & Baber, H. (2023). A snapshot of digital literacy. Library Hi Tech News, 40(1), 20-23. https://doi.org/10.1108/LHTN-12-2021-0095
Torres, P., & Godinho, P. (2025). National competitive advantage in the digital age: A necessary condition analysis. Competitiveness Review: An International Business Journal. https://doi.org/10.1108/CR-05-2025-0160
Vasani, S., & Abdulkareem, A. M. (2024). MSME market presence and competitiveness in a global economy. Cogent Economics & Finance, 12(1), 2416992. https://doi.org/10.1080/23322039.2024.2416992
Wang, C., & Si, L. (2024). The intersection of public policy and public access: Digital inclusion, digital literacy education, and libraries. Sustainability, 16(5), 1878. https://doi.org/10.3390/su16051878
Wang, J. (2025). Can digital literacy improve income mobility? Evidence from China. Telecommunications Policy, 49(6), 102960. https://doi.org/10.1016/j.telpol.2025.102960
Widiarty, W. S. (2023). The Role of the Government in Reaching the Welfare of Small and Medium Enterprises in the Perspective of Law Number 20 of 2008 Concerning Micro, Small and Medium Enterprises. Russian Law Journal, 11(4), 449-457. https://doi.org/10.37680/almanhaj.v5i1.2543
Yuwono, T., Novandari, W., Suroso, A., & Setyanto, R. P. (2025). The importance of ICT adoption on MSMEs performance: the mediating role of distinctive competencies. Journal of Enterprising Communities: People and Places in the Global Economy, 19(3), 610-630. https://doi.org/10.1108/JEC-06-2024-0113
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Achmad Basofitrah, Sudarmiatin, Heri Pratikto
This work is licensed under a Creative Commons Attribution 4.0 International License.
