Cultural Logics and Selective Digitalization: Rethinking Innovation Diffusion Through Collective Governance in Craft-Based SMEs

Abstract

This study rethinks innovation diffusion in craft-based small and medium-sized enterprises (SMEs) by examining how cultural logics and collective governance shape selective digitalization. Drawing on a qualitative case of Ata handicraft SMEs in Bali, Indonesia, the study analyzes in-depth interviews with artisans through the lens of Innovation Diffusion Theory. The findings reveal that digital technologies are not rejected but adopted selectively, mediated by Balinese Hindu philosophies such as Tri Hita Karana, Tat Twam Asi, and Segilik Seguluk Selunglung Sebayantaka, which emphasize balance, relational ethics, and communal solidarity. Rather than pursuing efficiency-driven digital adoption, artisans prioritize collective control, cultural continuity, and equitable value distribution. Digital tools function primarily as complementary mechanisms—supporting coordination, documentation, and market interaction—rather than as transformative drivers of organizational change. This study contributes theoretically by extending Innovation Diffusion Theory beyond linear adoption models, demonstrating how culturally grounded governance structures recalibrate the meaning and trajectory of digital innovation. More broadly, it offers insights for inclusive innovation discourse by showing how collective institutions enable SMEs to engage with digitalization while safeguarding cultural integrity and social sustainability.