Determinants of SME performance: Evidence from Indonesia

Abstract

The rapid development of information technology encourages small and medium enterprises (SMEs) to accelerate digital transformation to increase their sustainable competitiveness. However, improved entrepreneurial skills must also support technology readiness to adopt e-commerce. This study aims to analyze the influence of entrepreneurial skills and e-commerce, which mediate the factors of technology readiness, top management support, and competitive pressure, on SME performance. The partial least squares structural equation modeling (PLS-SEM) was applied to estimate the research model on data from 520 respondents who actively use e-commerce in their business activities in Jakarta, Indonesia. Data were obtained by distributing questionnaires directly to SME. The results showed that entrepreneurial skills and e-commerce adoption positively affect SME performance. Furthermore, technology readiness, top management support, and competitive pressure positively affect e-commerce adoption and have implications for improving SME performance. Finally, this paper provides recommendations for SME managers and practitioners to improve business performance: e.g., they should enhance their entrepreneurial skills and increase e-commerce adoption for operational efficiency.