The Effect of Business Environment, Business Capital, and Innovation Strategy on the Competitiveness of Waste-Based MSMEs in Sidoarjo
DOI:
https://doi.org/10.35870/ijmsit.v6i2.8235Keywords:
Business environment, Business capital, Innovation strategy, MSME competitiveness, Circular economyAbstract
Micro, small, and medium enterprises (MSMEs) that convert household waste into marketable products occupy a strategic position in Indonesia's circular economy agenda, yet they remain among the least competitive segments of the national business population. This study examines the simultaneous and partial effects of the business environment, business capital, and innovation strategy on MSME competitiveness in Sidoarjo, East Java. An explanatory quantitative design was applied. Data were collected between April and August 2025 through structured questionnaires and interviews with owner-managers of waste-based MSMEs. Of 135 questionnaires distributed, 120 were returned complete and analysable, an effective response rate of 88.9 per cent. Respondents were selected purposively on two criteria: the enterprise uses organic or inorganic household waste as a production input, and the enterprise has operated for more than one year. All constructs were measured on five-point Likert scales and analysed using multiple linear regression (ordinary least squares) in SPSS after validity, reliability, and classical assumption testing. The results show that all three predictors exert positive and statistically significant effects on competitiveness: innovation strategy (β = 0.409; p < 0.001), business environment (β = 0.314; p < 0.001), and business capital (β = 0.246; p = 0.001). Jointly the three variables explain 55.8 per cent of the variance in competitiveness (F (3, 116) = 48.73; p < 0.001; adjusted R² = 0.546). Innovation strategy is the dominant determinant, indicating that capability-building interventions deliver greater competitive leverage than financing support alone. The study extends the resource-based view to waste-processing microenterprises and provides evidence-based guidance for local MSME development policy.
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