Digital Economy and MSME Growth in Eastern Indonesia: Empirical Evidence and Strategic Insights

Abstract

The digital economy presents a transformative opportunity for Micro, Small, and Medium Enterprises (MSMEs) in developing regions. However, empirical evidence on its impact in the context of Eastern Indonesia remains limited. This study investigates the relationship between the adoption of the digital economy—encompassing digital tools, e-commerce, and digital financial services—and the growth of MSMEs in Eastern Indonesia. A quantitative approach was employed, utilizing a survey questionnaire distributed to 150 MSME owners across three provinces: East Nusa Tenggara, Maluku, and Papua. Data were analyzed using multiple linear regression to test the hypotheses. The results indicate a statistically significant positive relationship between the composite digital economy adoption index and MSME growth metrics (sales growth and market expansion). Specifically, digital financial literacy and e-commerce utilization emerged as the strongest predictors. The findings suggest that while infrastructure challenges persist, targeted interventions in digital skills training and financial inclusion can significantly accelerate MSME development. This study contributes to the literature by providing region-specific empirical evidence from Eastern Indonesia, highlighting the critical role of digital financial literacy as a catalyst for growth. The discussion offers strategic insights for policymakers and stakeholders to design more effective digital inclusion programs, ultimately fostering equitable economic development across the Indonesian archipelago.