Decision on Information and Communication Technology Adoption on Small Medium Enterprises (SMEs): Evidence from Yogyakarta, Indonesia

Abstraksi

While SMEs have important role in job creation in most of the countries, this also occurred in Indonesia. Until 2015, Indonesia has 56.54 million of SMEs. Productive sector of SMEs employed 107.6 million people and contributed approximately 60.6% of Indonesian GDP. From the Deputy of Macroeconomics and Finance, Ministry of Economic Affairs, among the number of Indonesian SMEs, small enterprises account for 93.4%; medium enterprises are 5.1%; while large enterprises account for 1% of them. This paper will discuss about the study we conducted to SMEs in Kabupaten Bantul and Yogyakarta City, two large areas in Special Region of Yogyakarta. In Yogyakarta region, there are 220,703 SMEs in 2015; 230,047 SMEs in 2016, and 238,619 SMEs in 2017. Around 26% of them are located in Kabupaten Bantul, while 14% of them are located in Yogyakarta City (data presented by Kementerian Koperasi dan UKM, Government of Indonesia). Previous studies revealed several barriers in ICT adoption among SMEs. This paper aims to understand what factors that affect decision in ICT utilization in SMEs, with the sample in Kabupaten Bantul and Yogyakarta City. Survey was conducted in January 2018 to 700 randomly selected SMEs in various sector. From the data, we observed that 61% of SMEs have used the internet in operational activities. In terms of training obtained, most workers received training on production, while not all the worker received marketing and managerial training. Using logit model involving owner’s characteristics, infrastructure, and some variables related to workers; we found consistency among our models in terms of sign and magnitude. We include owner and SMEs characteristics; additional training and workers characteristics; and control all the regressions in our models, respectively. We also found that owners’ characteristics have higher influence in decision of using ICT compared to workers characteristics (e.g.: education and training). Infrastructure (network signal) only has little influence on ICT usage decision making. Among the job sectors, we found that service sector has high probability to use ICT for its businesses. From here, we learnt that in order to create competitive SMEs, government should not only focus on investment in infrastructure but most important, is investment in human capital including entrepreneurial and managerial skills.