Digital Transformation and MSME Performance in Medan: The Roles of Digital Marketing, E-Commerce, Fintech, and Digital Literacy

Dede Ansyari Guci; Esther Praja Anggriany Panggabean; Jamaluddin Jamaluddin

doi:10.61255/jeemba.v4i5.1274

Authors

Dede Ansyari Guci Universitas Prima Indonesia, Indonesia
Esther Praja Anggriany Panggabean Universitas Prima Indonesia, Indonesia
Jamaluddin Universitas Prima Indonesia, Indonesia

DOI:

https://doi.org/10.61255/jeemba.v4i5.1274

Keywords:

Technology Adoption, Financial Inclusion, Entrepreneurial Capability, MSME Performance, Digital Literacy

Abstract

Purpose – This investigation evaluates how digital marketing, e-commerce adoption, fintech usage, and digital literacy—as four distinct dimensions of digital transformation—affect the performance of Micro, Small, and Medium Enterprises (MSMEs) based in Medan, with self-reported MSME performance serving as an operational indicator of short- to medium-term business outcomes.

Design/methodology/approach – A quantitative research design was executed using empirical data collected through a structured quota-purposive sampling procedure from 200 digitally active MSME operators across five major industrial sectors in Medan. Structural Equation Modeling–Partial Least Squares (SEM-PLS) via SmartPLS 4 was used to evaluate measurement validity, structural path relationships, control variable impacts, and out-of-sample predictive performance using PLSpredict.

Finding/Results – The empirical structural evaluation indicates that digital marketing (β = 0.232, p < 0.001), e-commerce adoption (β = 0.185, p < 0.001), fintech usage (β = 0.142, p < 0.001), and digital literacy (β = 0.364, p < 0.001) exhibit positive and statistically significant associations with MSME performance. Inclusion of control variables (firm age, owner education, sector) confirmed the robustness of these baseline relationships. PLSpredict analysis verified the model's out-of-sample predictive capabilities.

Originality/Value – The novelty of this study lies in its comparative empirical assessment of four key digital-transformation dimensions as parallel direct predictors within a unified variance-based structural framework among digitally engaged regional MSMEs. Grounded in entrepreneurship theory, the findings emphasize that while external digital platforms provide necessary market access and transactional tools, internal human capabilities (digital literacy) carry the largest relative association with performance outcomes.

Abstract views: 0 ,

PDF downloads: 0

Downloads

Download data is not yet available.

References

Abebe, M. (2021). E-commerce adoption and small business performance in developing economies. Journal of Small Business and Enterprise Development, 28(4), 567–583. https://doi.org/10.1108/JSBED-01-2021-0023.

Alraja, M. N., Imran, R., Khashab, B., & Shah, M. (2022). Technological innovation and organizational performance among SMEs: The mediating role of digital transformation. Sustainability, 14(8), 4572. https://doi.org/10.3390/su14084572

Arner, D. W., Barberis, J., & Buckley, R. P. (2021). Fintech and the transformation of financial services. Journal of Banking Regulation, 22(1), 1–12. https://doi.org/10.1057/s41261-020-00127-1

Bala, M., & Verma, D. (2021). Digital marketing adoption and business performance of SMEs: A review. International Journal of Business Innovation and Research, 26(3), 298–318. https://doi.org/10.1504/IJBIR.2021.115789

Bhandari, R. S., & Rodgers, S. (2022). What does the brand say? Effects of brand feedback to negative eWOM on brand trust and purchase intentions. International Journal of Advertising, 41(1), 148–170. https://doi.org/10.1080/02650487.2021.1882398

Chatterjee, S., Chaudhuri, R., Vrontis, D., & Thrassou, A. (2022). Digital transformation and organizational performance: The mediating role of digital business strategy. Technological Forecasting and Social Change, 174, 121–145. https://doi.org/10.1016/j.techfore.2021.121145

Chosanan, S., & Chaveesuk, S. (2022). Digital transformation readiness and SME sustainability: Evidence from emerging economies. Sustainability, 14(9), 5123. https://doi.org/10.3390/su14095123

Cohen, J. (1988). Statistical Power Analysis for the Behavioral Sciences (2nd ed.). Lawrence Erlbaum Associates.

Dwivedi, Y. K., Hughes, D. L., Coombs, C., Constantiou, I., Duan, Y., Edwards, J., & Upadhyay, N. (2021). Impact of digital marketing on SME performance. Journal of Business Research, 129, 401–414. https://doi.org/10.1016/j.jbusres.2021.01.054

Elia, G., Margherita, A., & Passiante, G. (2020). Digital entrepreneurship ecosystem: How digital technologies and collective intelligence are reshaping the entrepreneurial process. Technological Forecasting and Social Change, 150, 119791. https://doi.org/10.1016/j.techfore.2019.119791

Fitriani, N., & Huda, M. (2023). Financial technology adoption and MSME sustainability in Indonesia. International Journal of Professional Business Review, 8(5), 1–14. https://doi.org/10.26668/businessreview/2023.v8i5.1456

Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50. https://doi.org/10.1177/002224378101800104

Frederiksen, L., Wennberg, K., & Balachandran, C. (2016). Mobility and entrepreneurship: Evaluating the scope of knowledge-based theories of entrepreneurship. Entrepreneurship Theory and Practice, 40(2), 359–380. https://doi.org/10.1111/etap.12223

Frost, J. (2020). The fintech revolution and SME financial management. Financial Innovation, 6(4), 1–18. https://doi.org/10.1186/s40854-020-00188-1

Gomber, P., Kauffman, R. J., Parker, C., & Weber, B. W. (2022). Fintech and the transformation of financial services. Journal of Management Information Systems, 39(1), 5–42. https://doi.org/10.1080/07421222.2022.2031625

Guci, D.A., Ghazali, P.L., Foziah, N.H.M., & Arifin, J. (2021). Conceptual Framework of Factors Affecting SME Development: Moderating Factor onthe Relationship between Determinant Factors Selection and Performance of SMEs in Indonesia. The Journal of Management Theory and Practice, 2(2), 36-38. http://dx.doi.org/10.37231/jmtp.2021.2.2.107

Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2021). A primer on partial least squares structural equation modeling (PLS-SEM) (3rd ed.). Sage Publications.

Haryanto, T., & Mawardi, W. (2022). Digital financial inclusion and MSME competitiveness in Indonesia. Economies, 10(7), 173. https://doi.org/10.3390/economies10070173

Khin, S., & Ho, T. C. (2019). Digital technology, digital capability and organizational performance. International Journal of Innovation Science, 11(2), 177–195. https://doi.org/10.1108/IJIS-08-2018-0083

Klein, P. G. (2016). Why entrepreneurs need firms, and the theory of the firm needs entrepreneurship theory. Revista de Administração, 51(3), 323–326. https://doi.org/10.1016/j.rausp.2016.06.007

Kock, N. (2015). Common method bias in PLS-SEM: A full collinearity assessment approach. International Journal of e-Collaboration, 11(4), 1–10. https://doi.org/10.4018/ijec.2015100101

Lee, I., & Shin, Y. J. (2021). Fintech: Ecosystem, business models, investment decisions, and challenges. Business Horizons, 64(3), 297–310. https://doi.org/10.1016/j.bushor.2020.11.001

Lestari, D., & Santoso, B. (2023). The role of digital capability in improving SME performance. Journal of Open Innovation: Technology, Market, and Complexity, 9(2), 100051. https://doi.org/10.1016/j.joitmc.2023.100051

Li, F., Li, H., & Li, S. (2021). E-commerce adoption and SMEs innovation performance: Evidence from Asia. Information Systems Frontiers, 23, 1015–1030. https://doi.org/10.1007/s10796-020-10029-1

Marvel, M. R., Davis, J. L., & Sproul, C. R. (2016). Human capital and entrepreneurship research: A critical review and future directions. Entrepreneurship Theory and Practice, 40(3), 599–626. https://doi.org/10.1111/etap.12136

Ng, W. (2021). Digital literacy: Concepts, policies, and practices. Education and Information Technologies, 26, 6595–6615. https://doi.org/10.1007/s10639-021-10569-3

Nguyen, H., & Waring, T. (2020). The impact of e-commerce adoption on SME performance. Journal of Enterprise Information Management, 33(4), 789–807. https://doi.org/10.1108/JEIM-03-2019-0072

Nuseir, M. T. (2020). The impact of digital media marketing on SME performance. International Journal of Business Innovation and Research, 23(3), 355–370. https://doi.org/10.1504/IJBIR.2020.109123

Oliveira, T., & Martins, M. F. (2021). Understanding e-business adoption across industries in European countries. Industrial Management & Data Systems, 121(7), 1335–1354. https://doi.org/10.1108/IMDS-01-2021-0031

Park, J., & Kim, S. (2021). Digital literacy and SME performance: Evidence from Korea. Technological Forecasting and Social Change, 166, 120631. https://doi.org/10.1016/j.techfore.2021.120631

Podsakoff, P. M., MacKenzie, S. B., Lee, J. Y., & Podsakoff, N. P. (2003). Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879–903. https://doi.org/10.1037/0021-9010.88.5.879

Pratama, M., & Nasution, A. (2023). Digital transformation of MSMEs in Medan City: Challenges and opportunities. Journal of Indonesian Business and Development Studies, 9(2), 45–59. https://doi.org/10.26593/jibds.v9i2.5798

Putra, A. R., & Handayani, P. W. (2022). QRIS adoption and digital payment usage among MSMEs in Indonesia. Procedia Computer Science, 197, 444–451. https://doi.org/10.1016/j.procs.2021.12.158

Rahayu, R., & Day, J. (2022). Determinants of digital adoption in Indonesian SMEs. Journal of Small Business and Enterprise Development, 29(1), 60–82. https://doi.org/10.1108/JSBED-02-2021-0074

Ramdani, B., Chevers, D., & Williams, D. (2022). SMEs' adoption of digital technology in emerging markets. Journal of Enterprise Information Management, 35(4/5), 1205–1225. https://doi.org/10.1108/JEIM-10-2020-0420

Saura, J. R., Palos-Sanchez, P., & Correia, M. B. (2022). Digital marketing strategies and online consumer behavior. Journal of Innovation & Knowledge, 7(2), 100176. https://doi.org/10.1016/j.jik.2022.100176

Setiawan, R., & Widodo, T. (2021). Digital literacy and MSME resilience during economic disruption. Heliyon, 7(10), e08157. https://doi.org/10.1016/j.heliyon.2021.e08157

Siregar, A., Nasution, R., & Lubis, D. (2022). Digital technology adoption in Medan MSMEs: An empirical study. Journal of Entrepreneurship in Emerging Economies, 14(3), 395–415. https://doi.org/10.1108/JEEE-06-2021-0156

Susanti, N., & Syahputra, R. (2023). Digital transformation and sustainable MSME growth in Indonesia. Sustainability, 15(4), 3321. https://doi.org/10.3390/su15043321

Tambunan, T. (2020). MSMEs in times of crisis: Evidence from Indonesia. Journal of Developing Economies, 5(2), 91–103. https://doi.org/10.20473/jde.v5i2.20848

Tjahjadi, B., Soewarno, N., & Hariyati, H. (2022). The role of innovation capability in enhancing SME competitiveness. Journal of Open Innovation: Technology, Market, and Complexity, 8(3), 152. https://doi.org/10.3390/joitmc8030152

Thompson, N. A., Verduyn, K., Stam, A. M. C. E., & Gartner, W. B. (2016). Entrepreneurship as practice: Grounding contemporary practice theory into entrepreneurship studies. Entrepreneurship & Regional Development, 28(9–10). https://doi.org/10.1080/08985626.2016.1251736

Van Deursen, A. J., & Van Dijk, J. A. (2022). The first-level digital divide shifts from inequalities in physical access to inequalities in material access. New Media & Society, 24(6), 1257–1276. https://doi.org/10.1177/14614448221076641

Van Laar, E., Van Deursen, A. J., Van Dijk, J. A., & De Haan, J. (2020). The relation between 21st-century skills and digital skills: A systematic literature review. Computers in Human Behavior, 109, 106357. https://doi.org/10.1016/j.chb.2020.106357

Vial, G. (2019). Understanding digital transformation: A review and research agenda. The Journal of Strategic Information Systems, 28(2), 118–144.

Winasis, S., Riyanto, S., & Ariyanto, E. (2021). Digital transformation in Indonesian SMEs. Journal of Asian Finance, Economics and Business, 8(3), 897–904. https://doi.org/10.13106/jafeb.2021.vol8.no3.0897

Yasa, N. N. K., Giantari, I. G. A. K., Setini, M., & Rahmayanti, P. L. D. (2021). The role of competitive advantage in mediating digital capability and business performance. Management Science Letters, 11(3), 1013–1022. https://doi.org/10.5267/j.msl.2020.10.024

Zhang, X., & Chen, H. (2022). Digital capability and SME innovation performance in emerging economies. Technological Forecasting and Social Change, 174, 121224. https://doi.org/10.1016/j.techfore.2021.121224