Building a knowledge-based innovation ecosystem for MSME independence in Indonesia

Abstract

MSMEs in Indonesia play a vital role in driving national economic growth, yet many continue to struggle with business independence, limiting their ability to survive and compete. This study aims to analyze how the business knowledge ecosystem, competitive advantage, and knowledge sharing interact in influencing MSME independence within a knowledge-based innovation ecosystem. Conducted in East Java Province, the region with the highest number of MSMEs in Indonesia, this study involved 400 MSME respondents selected using the Slovin formula. Data were collected through questionnaires and brief interviews and analyzed using Structural Equation Modeling with SmartPLS. The results show that the business knowledge ecosystem directly strengthens MSME independence and also indirectly enhances it through competitive advantage. Knowledge sharing likewise exerts a direct positive influence on MSME independence and moderates the relationship between the business knowledge ecosystem and MSME independence. However, knowledge sharing does not strengthen the influence of competitive advantage on MSME independence. These findings highlight the importance of integrated knowledge mastery covering production, marketing, finance, digital literacy, and competitive strategies in building sustainable MSME independence. This study contributes to business management knowledge by providing a comprehensive model that integrates multiple knowledge domains and knowledge-sharing activities. Practically, it offers insights for policymakers in designing strategies to develop knowledge-based innovation ecosystems that support MSME independence.