The Role of SMEs in Economic Growth: Adaption, Digitalization, And Global Competitiveness

Abstract

Small and Medium Enterprises (SMEs) have long been recognized as the backbone of national economies, contributing significantly to employment, innovation, and inclusive growth. In Indonesia, SMEs face increasing pressures to adapt to rapid global changes, particularly during crises such as the COVID-19 pandemic, which reshaped consumer behavior and disrupted supply chains. This study aims to analyze the role of SMEs in driving economic growth with a focus on three key aspects: adaptation, digitalization, and global competitiveness. A qualitative literature review method was employed, drawing on peer-reviewed journal articles, policy documents, and institutional reports published within the last decade. Findings reveal that adaptive capacity enables SMEs to maintain resilience by reconfiguring resources and business models during shocks. Digitalization, through the adoption of e-commerce, online payments, and digital marketing, has proven essential for expanding market reach, reducing transaction costs, and fostering innovation. However, the digital divide—driven by disparities in infrastructure, finance, and human capital—creates uneven outcomes among SMEs. Global competitiveness, meanwhile, depends on the ability of SMEs to comply with international standards, access finance, and integrate into global value chains, with digital platforms offering new opportunities yet also posing governance challenges. Case studies from Indonesia demonstrate that SMEs leveraging adaptation and digitalization achieve greater resilience and access to international markets. The study concludes that adaptation, digitalization, and competitiveness are interconnected, requiring not only firm-level strategies but also supportive ecosystems, policies, and collaborative networks to maximize SMEs’ contribution to sustainable economic growth.