The Mediating Role of E-Commerce Adoption in the Relationship Between Government Support and SME Performance in Developing Countries

Abstract

In developing countries, SMEs contribute significantly to GDP and employment (up to 33% and 45%, respectively). Governments in developing countries such as Indonesia take initiatives to provide support to MSMEs through facilities and regulations to improve their performance. Previous studies lack theoretical consensus on the relationship between government support (e.g., incentives, training, regulatory changes, technology facilitation) and SME performance. This study uses a quantitative approach. An online survey of 1514 SMEs was conducted for this study. A valid sample of 402 SMEs was collected for this study. This study investigates the government-supported SME performance relationship and explores the mediating role of e-commerce adoption on the government-supported SME performance relationship. The hypotheses were tested using the partial least squares (PLS) approach with the help of SmartPLS 3.2.8 software. This study demonstrates the mediating role of ecommerce marketplace adoption in the relationship between government support and SME performance. The findings provide new insights into the role of government in driving SME performance (p < 0.00). This study can have implications for determining government policies to improve the performance of SMEs. This study explains the need for government policies to encourage SMEs to adopt e-commerce. In addition, the government can improve facilities for SMEs to make it easier to adopt the e-commerce marketplace.