CHALLENGES SUSTAINABILITY OF MSMEs IN THE DIGITAL ERA IN BONTANG

Abstract

Purpose: This study aims to analyze the influence of digital literacy, entrepreneurial orientation, access to digital finance, and competitive pressure on the business performance of MSMEs, and its implications for their sustainability in Bontang City. The research employed a quantitative approach with explanatory design. Population of this research were all MSMEs in Bontang City with sample of 120 respondents selected through purposive sampling. Data analysis used Structural Equation Modeling with Partial Least Squares (PLS-SEM) approach. The results reveal that digital literacy, entrepreneurial orientation, and competitive pressure have significant effects on business performance of MSMEs with path coefficients of 0.291 (p=0.002), 0.324 (p=0.000), and 0.228 (p=0.008) respectively. Access to digital finance does not show significant direct effect on business performance (p=0.229). Business performance significantly affects MSMEs sustainability with path coefficient of 0.401 (p=0.000). Business performance also proven to mediate the influence of digital literacy, entrepreneurial orientation, and competitive pressure on MSMEs sustainability. The findings emphasize the critical role of digital skills, proactive entrepreneurial strategies, and market dynamics in enhancing performance and supporting long-term business sustainability. MSMEs need to improve digital literacy and entrepreneurial orientation to face competitive pressure in digital era. This research provides a comprehensive model that links digital and entrepreneurial drivers to sustainability through business performance in the specific context of MSMEs in industrial cities in Indonesia.