FINANCIAL PERFORMANCE OF INDONESIAN MSMES: THE ECONOMIC ROLE OF SUSTAINABILITY STRATEGY, INTELLECTUAL CAPITAL, AND DIGITAL LITERACY

Abstract

In an era characterised by heightened global uncertainty, maintaining sound financial outcomes has become imperative for micro, small, and medium enterprises (MSMEs) as they confront escalating environmental, social, and economic constraints while striving for sustained competitiveness and long-term viability. Although MSMEs play a pivotal role in national economic advancement, many continue to struggle to translate sustainability-oriented initiatives and intellectual capital into tangible financial results. In response, this study focuses on identifying the critical factors shaping the financial performance of Indonesian MSMEs. Drawing on survey data collected from 296 business managers, the analysis applied PLS-SEM to examine the interrelationships among the constructs specified in the conceptual framework. The results indicate that both corporate sustainability strategy and intellectual capital exert a significant effect on financial performance. In addition, sustainability performance partially mediates the association between corporate sustainability strategy and financial performance, whereas green innovation practices fully mediate the relationship between intellectual capital and financial performance. The analysis further reveals that digital literacy strengthens the impact of corporate sustainability strategy on sustainability performance, as well as the influence of intellectual capital on green innovation practices. By integrating sustainability, innovation, and digitalisation perspectives, this study enriches the theoretical discourse on MSMEs financial performance and offers actionable insights for managers and policymakers aiming to reinforce the financial resilience of MSMEs within emerging economy contexts.