MSME digitalization: How are social capital factors in encouraging the use of digital applications?

Abstract

This research explores the impact of social capital on the adoption of digital applications within Micro, Small, and Medium Enterprises (MSMEs). In the current competitive environment, embracing digitalization is essential for improving the competitiveness of MSMEs; however, challenges such as weak social networks can impede technology uptake. Utilizing a quantitative approach, the study distributed questionnaires to 160 MSME participants, with data analysed through path analysis using SmartPLS. The findings indicate that social capital—which includes relationships, networks, and trust among business stakeholders—plays a critical role in facilitating access to and adoption of digital applications. Results suggest that MSMEs with strong social networks are more adept at integrating digital technologies, fostering innovation, and improving overall business performance. The study recommends initiatives to enhance collaboration and strengthen social networks among MSMEs to support their digitalization efforts. Ultimately, this research deepens the understanding of social capital's influence on MSME digitalization and offers practical strategies for stakeholders to increase the utilization of digital applications in this sector.