Identify Key Success Factors Using Interpretive Structural Modeling (ISM) : A Case Study in Small and Medium Enterprise in Indonesia

Abstract

Small Medium Enterprises (SMEs) have a very significant role in the economy of the community. The large number of SMEs on the same field causes high competition to survive in market. A lot of literature empirically discuss the success factors of SMEs in Indonesia, but there are still few which carry out further research by structuring a model of interconnectedness between these elements to find out the key factors. This study aims to determine the key factors by classifying and structurally modelling the factors based on the level of the affecting elements of an SME's success. Interpretive Structural Modeling (ISM), which is an interactive learning process where a set of elements are structured into a comprehensive system model, is used as the approach. ISM helps in determining the sequence and purpose of complex relationships between elements in the system. This research found 24 success factors that divided into 13 levels and categorized into 4 sectors including autonomous, dependent, linkage, and independent sector. The sub-elements or key factors that influence the success of SMEs include (1) motivation and experience, (2) entrepreneurial spirit and leadership, (3) formal education level, and (4) technical guidance.