Impact Digital Transformation towards Growth Regional Economics : A Study The case of MSMEs in Indonesia

Abstract

This study aims to analyze the influence of digital transformation on regional economic growth through a case study of Micro, Small, and Medium Enterprises (MSMEs) in five provinces in Indonesia. The quantitative approach was employed using multiple linear regression and ANOVA to measure the relationship between digital adoption levels—including the use of e-commerce, social media, and digital payment systems—and MSME performance and their contribution to regional economic growth. The research was conducted across five provinces (DKI Jakarta, West Java, Central Java, South Sulawesi, and East Nusa Tenggara) with a total sample of 300 MSMEs selected through stratified random sampling. Data collection involved structured questionnaires, semi-structured interviews, and secondary data from government agencies and international institutions. The results show that digital transformation has a significant impact on improving turnover, market reach, and operational efficiency of MSMEs. Provinces with high levels of digital adoption such as DKI Jakarta and West Java show greater MSME contributions to economic growth compared to regions with low digitalization levels such as East Nusa Tenggara. These findings support endogenous growth theory which emphasizes the importance of innovation and technology in driving economic productivity. The regression analysis revealed that 69% of variance in MSME performance can be explained by digitalization variables, with e-commerce use showing the highest coefficient (β=0.312, p<0.001). This research recommends the need for region-based policies that encourage digital literacy, infrastructure provision, and cross-sector collaboration to accelerate equitable distribution of digital transformation benefits. Digital transformation is proven not only to strengthen MSME competitiveness but also plays a role as the main driver of sustainable regional economic development, particularly in addressing regional disparities and promoting inclusive growth.