LEADERSHIP AND GOVERNANCE IN MSMES: IMPROVING FINANCIAL PERFORMANCE THROUGH DIGITALIZATION

Abstract

Rapid advances in digital technology have changed the business landscape, yet many Micro, Small, and Medium Enterprises (MSMEs) in Indragiri Hilir, Indonesia, struggle to adapt and leverage these innovations for financial growth. This study addresses the research gap regarding the interaction between leadership, governance, and digitalization in improving the financial performance of MSMEs. The purpose of this study is to examine how effective leadership and governance practices can facilitate the adoption of digital technologies and subsequently improve the financial outcomes of MSMEs in Indragiri Hilir. Using a mixed-method approach, this study incorporates a quantitative survey of 100 MSME owners. Findings show that visionary leadership and strong governance structures contribute significantly to the success of digital transformation initiatives. In addition, MSMEs that effectively implement digital solutions show marked improvements in terms of financial efficiency, market reach and overall profitability. The study concludes by proposing a framework for MSME leaders to navigate the digitalization process, emphasizing the critical role of adaptive governance in sustaining financial performance in the digital age.