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Connecting The Dots: The Source Of Sustainable Economic Growth Through The Integration Of Smes In Industry’S Supply Chain

Author

Listed:
  • Arnita Rishanty

    (Bank Indonesia)

  • M. Cahyaningtyas

    (Bank Indonesia)

  • Rudy Marhastari

    (Bank Indonesia)

  • Rizki Fitrama

    (Bank Indonesia)

  • Retno Puspita K. Wicaksono

    (Bank Indonesia)

  • Rivky Rasyid

    (Bank Indonesia)

Abstract

This study is to identify the benefits of Micro, Small, and Medium Enterprises (MSME) participation in the industry supply chains and to analyze the commitments, enablers, and obstacles that shape MSME involvement in the supply chains of medium and large industries. The integration of MSME into the manufacturing industry supply chain is crucial for advancing economic development and fostering sustainable growth. Currently, the proportion of MSME that have entered supply chains remains low, indicating significant potential for increasing MSME contributions to the manufacturing sector. Building on the results of the mixed method approach comprising Propensity Score Matching (PSM) and Partial Least SquaresStructural Equation Modeling (PLS-SEM) analysis, and case study analysis of two high-value-added sectors (identified through input-output table analysis), rubber and automotive sectors, this study has identified the significance of MSME participation in supply chains, as well as the factors influencing MSME performance. This study suggests that supply chain financing (SCF) plays a critical role in ensuring the commitment of MSME to be part of the industrial supply chains, which in turn positively and significantly affects MSME performance. Supply chain commitment is also suggested to mediate the relationship between SCF and MSME performance. Further, the study identifies challenges faced by MSME and delivers policy recommendations for regulators in supporting MSME

Suggested Citation

  • Arnita Rishanty & M. Cahyaningtyas & Rudy Marhastari & Rizki Fitrama & Retno Puspita K. Wicaksono & Rivky Rasyid, 2024. "Connecting The Dots: The Source Of Sustainable Economic Growth Through The Integration Of Smes In Industry’S Supply Chain," Working Papers WP/05/2024, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp052024
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    References listed on IDEAS

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    1. Epede, Mesumbe Bianca & Wang, Daoping, 2022. "Global value chain linkages: An integrative review of the opportunities and challenges for SMEs in developing countries," International Business Review, Elsevier, vol. 31(5).
    2. Gary Gereffi & Xubei Luo, 2015. "Risks and Opportunities of Participation in Global Value Chains," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(4), pages 51-63, June.
    3. Irvan Kuswardana & Nachrowi Djalal Nachrowi & Telisa Aulia Falianty & Arie Damayanti & Robert Read, 2021. "The effect of knowledge spillover on productivity: Evidence from manufacturing industry in Indonesia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1923882-192, January.
    4. Affandi, Yoga & Ridhwan, Masagus M. & Trinugroho, Irwan & Hermawan Adiwibowo, Danny, 2024. "Digital adoption, business performance, and financial literacy in ultra-micro, micro, and small enterprises in Indonesia," Research in International Business and Finance, Elsevier, vol. 70(PB).
    5. Padang Wicaksono & Yulial Hikmah & Rayinda Nur Ilmiawani, 2023. "Productivity and Global Value Chains: A Tale from the Indonesian Automobile Sector," Economies, MDPI, vol. 11(10), pages 1-12, October.
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