JRSSEM 2022, Vol. 02, No. 5, 889 – 899

E-ISSN: 2807 - 6311, P-ISSN: 2807 - 6494

DOI: 10.36418/jrssem.v2i05.347. https://jrssem.publikasiindonesia.id/index.php/jrssem

INTERNATIONALIZATION OF MSMES THROUGH

NETWORKS (NETWORKING) TO IMPROVE WELFARE

Zulpardisyah

Universitas Negeri Malang, Malang, Indonesia

e-mail: zulpardisyah@gmail.com

*Correspondence: zulpardisyah@gmail.com

Submitted

: 26

November 2022

Revised

: 17

December 2022

Accepted

: 29

December 2022

Abstract: Internationalization of MSMEs through networking in the context of improving

welfare must be carried out in stages. To find out the various welfare conditions of MSMEs,

several sustainable development systems are needed, so that the standard of living of MSMEs

in the country continues to increase. The orientation and focus“on empowering MSMEs that

will be internationalized need to be improved, including by providing easy access to company

functions and providing supporting facilities, so that all MSMEs that will be internationalized

can apply general rules that apply in the economy in a consistent, consistent and efficient

manner. The efforts made are through a strong business network (networking). The network is

an important factor in the MSME business both on a national and international scale in order

to improve welfare, economies of scale, and expand market share. MSMEs with a strong

network are the capital to run their business activities effectively and efficiently.

Keywords: Internationalization MSMEs Networking Welfare.

Zulpardisyah | 890

INTRODUCTION

MSMEs “are one of the sources of

driving a nation's economy, and more than

that, MSMEs have a big role in absorbing labor

and providing gross domestic product for

Indonesia.[1

]

The absorption of this workforce has

reached around 85 million workers in

Indonesia and this has contributed to

domestic income of around 52.3 percent.[2]

This shows that MSMEs play an important role

in reducing the” problem of poverty in

Indonesia.[32]

The existence of “MSMEs in reducing

the increase in the number of unemployed in

Indonesia is by recruiting many workers as an

effort to assist the government in eradicating

poverty

.[3]

The storm of the economic crisis in

Indonesia has made several large companies

experience a slowdown in growth, not even a

few have stopped.[4] Unlike the case with

MSMEs that still survive and live in the face of

an economic crisis. Thus, it is natural that

private sector economic development can be

focused on MSMEs, including by conducting

internationalization of MSMEs.”

Internationalization is an innovation of

the enterprise “and often requires making

decisions under conditions of uncertainty,

taking into account which knowledge is

important.[31]

The role of MSMEs in the economy,

among others: implementing economic

activities, creating job opportunities, business

actors in developing the local economy and

empowering communities, creating

innovations and new markets, and business

actors contributing to the balance of

payments.[5]”

Based“on the large role of MSMEs, the

development of the internationalization of

MSMEs must be planned, structured, and

sustainable, so that they are productive and

competitive to improve welfare.

The development and growth of

networking between countries has opened up

opportunities for MSMEs to carry out

internationalization activities in the form of

exports, direct investment and licensing,

where these activities can improve the welfare

of business actors. Thus, it is important for

MSMEs to create and develop mutually

beneficial business networks

Internationalization activities that can

be carried out by MSMEs are exports due

to minimal financial capital,[6] so MSMEs

need to develop them through business

networks with a labor-intensive

internationalization strategy."

Business Network is an important

factor in “the world of MSMEs in the

context of increasing economies of scale,

efficient business management and

expanding market coverage. MSMEs with a

large business network can carry out their

operations more effectively and efficiently

as a capital for the” company's

competitiveness. This is supported by the

current global era which has opened up

opportunities for MSMEs to carry out

internationalization activities.

This research has a novelty value,

which aims “to find out whether the

internationalization of MSMEs can improve

welfare through business networks. The

business network is one of the factors that

determine the strategy in internationalizing

MSMEs, in addition to the business network

it will affect the competitiveness of MSMEs

891 | Internationalization Of Msmes Through Networks (Networking) To Improve Welfare

in internationalization activities, it will also

have a direct or indirect impact on the

welfare of business actors.

MATERIALS AND METHODS

This research is a qualitative

research using the“Systematic Literature

Review (SLR) method, which is a method

that is able to describe differences or

relationships between literatures, so as to

be able to conclude or describe a certain

thematic framework as a whole, as well as

provide new ideas so that they can be

followed up empirically.[7]

The SLR method is carried out

through studies and identification of

several journals according to the themes

studied. In this case, the researcher uses

books, journals, along with other literature

sources, and it is done inductively in order

to get more concrete results. This research

was conducted considering that Micro,

Small and Medium Enterprises (MSMEs) are

business sectors that play an important role

in the economy and are able to survive

during the economic crisis in Indonesia.

SLR research is carried out to

identify, review, evaluate and be able to

make interpretations of all research that has

been carried out based on the theme of the

discussion on the internationalization of

SMEs” as well as through the formulation of

the problem that has been determined.

The identification results are

expected to add “literature related to the

internationalization of MSMEs that play a

role in improving welfare through extensive

business networks and government efforts

in solving problems related to poverty and

unemployment.

The SLR method is carried out in several

stages, including:[8] The first stage,

selecting the theme and research topic. The

theme that was chosen was

Internationalization of MSMEs through

networks (networking) to improve welfare.

The second stage is developing

alternatives and determining the thematic

study innovations. In this case, the goal is

to find a solution in internationalizing

MSMEs through networks to improve

welfare. The thematic study of SLR that was

decided was the Internationalization of

MSMEs through networks.

The third stage, search and filter the

literature. The search was carried out

through Google Scholar, with the keywords

used, namely the internationalization of

MSMEs in Indonesia. The search results

show that there are 570 literatures most

relevant to this keyword.

The“fourth stage, grouping. Literature of

scientific works from search results, grouped

based on similarity in research focus and given a

general description.

The fifth stage, discussion. This

stage is an explanation of the findings of

the SLR. The formulation of the problem is

made and selected based on the needs

analysis of the research topic. The

formulation of the problem in the research,

among others:”

1) What are the internal factors that

influence the “internationalization of

MSMEs in Indonesia?

2) What are the challenges of

internationalizing MSMEs through

networks in Indonesia?

3) What is the government's role in the

internationalization of MSMEs through

networks in Indonesia?

What is the strategy for

Zulpardisyah | 892

internationalizing MSMEs through

networks to improve welfare?

RESULTS AND DISCUSSION

This research was conducted by

analyzing some“relevant literature related

to the theme of internationalization of

MSMEs through networks to improve

welfare in Indonesia. The literature sources

used include: books and scientific articles

related to the focus of research from 2018-

2022.

The discussion is grouped related to

the theme of Internationalization of MSMEs

through business networks to improve

welfare into 4 focus themes, namely those

relating to the internal factors of MSME

internationalization, the challenges of

MSME internationalization, the role of the

government in the internationalization of

MSMEs and MSME internationalization

strategies based on the literature. The focus

of the Research Theme is as follows:”

1. The factor “Internal

Internationalization of MSMEs through

networks to improve welfare in

Indonesia using 5 journals from Sijabat

& Muhammad (2019) [9]; Mangani

(2020) [10]; Hasanudin & Hendri (2021)

[11]; Latifah & Yuliati (2019) [12];

Mujianto et al (2021) [13];

2. Challenges of Internationalization of

MSMEs through networks to improve

welfare in Indonesia using 5 journals

from Putra Et al (2022) [14]; Hapsari Et

al (2022) [15]; Mege Et al (2020) [16];

Darmayanti Et al (2021) [17]; Wijaya Et

al (2022) [18].

3. The role of the government in the

internationalization of MSMEs through

networks to improve welfare in

Indonesia using 5 journals from

Adawiyah Et al (2022) [19]; Faisal &

Apriliadi (2021) [20]; Ismianti Et al

(2019) [21]; Muhsyi Et al (2021) [22];

Winarto (2020) [23].

4. Internationalization strategy of MSMEs

through networks to improve welfare

in Indonesia using 5 journals from

Kaukab (2021) [24]; Hadi Et al (2021)

[25]; Budiyanto (2020) [26]; Armiani Et

al (2021) [27]; Zen & Mukhlis (2022)

[28].”

MSMEs“are the sector that is able to

absorb the most labor in Indonesia,

reaching 97%. Thus, MSMEs are the most

important part of the Indonesian economy,

as a sector that is able to generate

productive workforce through investment

and change technology.

The internationalization of MSMEs

through networks has a major contribution

in improving the welfare of life, so this

needs to be considered because the

existence of MSMEs that will be

internationalized cannot be separated from

the opportunities and challenges faced. in

developing MSMEs in the international

arena which is influenced by several

internal factors.”

Internal Factors Internationalization of

SMEs through networks (Networking) to

improve welfare

Internal factors that often hinder the

internationalization of MSMEs for both

growth and development include limited

capital. The limitation of “the capital is felt

to make it difficult for MSMEs to develop.

Most MSMEs use private facilities to obtain

production cost capital because they have

893 | Internationalization Of Msmes Through Networks (Networking) To Improve Welfare

not been able to meet consumer demand.

The government needs to pay

attention and support so that the

internationalization of MSMEs can run well

to improve people's welfare.

Some MSME managers find it difficult

to get assistance from the government and

the process takes a relatively long time.

Considering that the existence of MSMEs

has a major contribution to the State, such

as providing job opportunities for the

community and having a significant impact

on economic growth and community

welfare, MSMEs should receive attention in

order to be able to compete internationally.

The government must be able to provide

export stimulation to MSME actors to

encourage MSME actors to explore foreign

markets.[34]

In addition to limited capital, the

availability of raw materials owned by

MSMEs also affects production activities, so

the scarcity of production materials can be

the cause of soaring prices. raw material.

This can be an obstacle in the

internationalization of SMEs to develop.

The price of raw materials that continues to

soar can affect the selling value of MSME

products which will have a direct impact on

sales. In addition, MSMEs that have a small

network will lack partners and suppliers of

raw materials, so the need to

internationalize MSMEs through networks.

Another internal factor is related to

the production equipment used. Most

MSMEs use simple manual tools, assuming

that the results of ancient technology are

better and more in line with what they

want.”

Bookkeeping Problems. The thing

that needs to be done in the

internationalization of MSMEs is orderly

bookkeeping. However, most MSME actors

still use a “simple (manual) bookkeeping

system and do not follow standard

bookkeeping administration rules, so they

need to be trained to achieve trade

competition in the international world

which is competitive considering the

importance of financial processing in

business continuity.

Limited Marketing. Marketing

limitations are a problem for MSME actors,

this makes it important to internationalize

MSMEs through collaborating with other

business actors at the local, national, and

international levels. However, there are still

many MSMEs that lack partner networks,

and have not been able to market their

products online, which makes these

products less well known to the wider

community. This shows the importance of

assistance from the government to train

digital marketing and provide access to the

internationalization of MSMEs.

The Problem of Determining the

Location and Layout of the Business. The

location of the business is included in the

internal factors that need to be considered

that affect the existence of MSMEs. MSMEs

that are ready for internationalization must

be in strategic locations, such as near

highways, near markets or public facilities,

and close to suppliers, making it easier for

business actors to obtain raw materials and

distribute their products. This needs to be

done to minimize production costs.

Managerial Ability. MSMEs that will

be internationalized must have

management resources who have good

managerial skills. Where business actors

must have the ability and knowledge

Zulpardisyah | 894

related to human resource management,

production management, financial and

other managerial management.” This is

necessary because a business with a larger

scope will require a large number of

workers, as well as demand for more

products.

The “skills of MSME managers

regarding market knowledge” can

encourage sufficient willingness to take

risks inherent in developing

differentiation/innovative products that

can facilitate a wider scope of

internationalization. Innovation has been

suggested as a possible relationship

between market orientation and firm

performance.[35]

Socialization related to Government

Training and Guidance for MSME actors so

that they can be competitive in the

international market is a necessity for

MSME actors.” The training and guidance is

a proof that the government should be

among the SME actors towards

international trade.

Some MSMEs experience problems in

distributing products from producers to

consumers in various regions in Indonesia

and abroad. This is due to the lack of

understanding of MSME actors to

determine safe distribution tools.

Challenges of Internationalization of

MSMEs through networks to improve

welfare in Indonesia

Various research results related to

the challenges of internationalization of

MSMEs, show that MSMEs often experience

various things, including: limited funds, lack

of knowledge regarding markets, there are

limitations related to technology and

innovation, limited quality of human

resources, business competition and

government policies.

The challenges are illustrated in table 1 as

follows:

Table 1.

The main challenges faced in the

internationalization of MSMEs in Indonesia

Tantangan

Frekuensi (%)

Raw material difficulty

8,59

Labor

1,09

Transportation difficulties

0,22

Marketing difficulties

34,72

Limited funds

51,09

Lainnya

3,93

Source: Winarto, 2020

In realizing the internationalization

of MSMEs that are “competitive through

networks for welfare, it is necessary to

know that the capabilities and strengths of

Indonesian MSMEs in the international

market show a comparison of the

contribution of MSMEs to the absorption of

labor force, GDP and export value in several

countries, as follows:

Catatan:

Contribution of SMEs to export value (%)

Contribution of SMEs to GDP (%)

Contribution of SMEs to employment (%)

895 | Internationalization Of Msmes Through Networks (Networking) To Improve Welfare

The data illustrates that MSMEs play an

important role in economic activity,

especially in the provision of employment,

and the acquisition of GDP. However,

holistically, it can be seen that the

contribution of Indonesian MSMEs in the

export trade balance is still inferior to other

countries such as Thailand, Malaysia, the

Philippines, as well as Vietnamese.”

The Government's Role in

Internationalization of MSMEs through

networks to improve welfare in Indonesia

Government policies in supporting

the internationalization process are very

important and needed for MSME managers

to expand the market through networks

and improve welfare.

The role of the government in

encouraging MSMEs to be able to grow

and develop at a higher level higher level

and competitive in the global market,

including by providing various incentives,

programs and policies “to strengthen

MSMEs and provide access for MSMEs in

order to face global competition. This

support, including:

1. Long-term planning– Attachment to

Law no. 17 of 2007 related to the RPJP

2005-2025, Chapter III number (23)

emphasizes that MSMEs are the real

sector to become science and

technology actors and are competitive

with imported products, able to

contribute to structural changes and

strengthen the domestic economy.[33]

2. Marketing support- The government

guarantees fair competition and

opportunities for MSME exporters,

actively participates in trade

negotiations and regional trade

agreements and bilaterally to reduce

various barriers. Among them is by

establishing SMESCO with the hope of

becoming an institution with

professional services for facilitate

business partners related to world-

class superior products of high quality,

as well as promote Indonesian MSMEs

to local and international business

partners.

3. Financial support - The Indonesian

government provides financial support

for MSMEs based on Decree No.

06/SKB/Dep.3/III/2010 and

026/KSB/03/2010. KemenkopUMKM in

collaboration with LPEI seeks to

facilitate MSME actors to encourage

export-oriented business activities. The

presence of LPEI that offers insurance

services with a competitive premium is

expected to increase the

competitiveness of Indonesian MSME

products abroad.

4. Providing incentives – Government

give special treatment regarding

MSME Taxpayer. MSME entrepreneurs

receive Income Tax incentives with the

issuance of PP 46/2013. The income tax

rate for MSMEs is up to 4.8 billion,

which is only 1% of turnover. In

addition, the Government provides

grants aimed at creating quality brand,

create branding that makes it different

from other products in the global

market. This includes counseling to

increase productivity and technology

capabilities, assistance in business

collaboration to improve technology

production, research, development

and marketing of products, creation of

a more friendly business environment,

Zulpardisyah | 896

continuous efforts to improve

transportation systems and increasing

market access through tariff

negotiations under bilateral, regional

and WTO arrangements.”

MSME Internationalization Strategy

through networks to improve welfare in

Indonesia

The internationalization strategy is

conceptually and theoretically divided into

two, namely the internalization theory

and“the electic theory. The theory of

internalization arises due to the

development of large companies that can

threaten the existence of MSMEs. In its

development, this theory seeks to

internalize the benefits that can be

obtained from internationalization,

localization, and ownership.

The ecletic theory in the

internationalization strategy emphasizes

more on the resources and knowledge of

MSMEs in determining markets and

networks in marketing their products.

Dess and Miller distinguish MSME

internationalization strategy into intended

strategy and realized strategy [29]. In this

case, the intended strategy refers to the

future consisting of goals, policies and

plans proposed and designed by MSME

managers. The strategy that is realized

refers to the past that combines the

components of the intended strategy with

those that are adjusted according to the

needs at the time, because the strategy

almost always changes in several ways

throughout its implementation.”

The “MSME internationalization

strategy can be carried out using a global

and process approach, including the

incremental approach, namely the Uppsala

and Innovation models. Building on

behavioral theory as well as the school of

innovation [30].

The behavioral school of thought,

understands that internationalization as a

sequential process that is incremental,

cumulative and linear, consists of a

succession of steps that must be passed by

every company that wants to develop

abroad. Each step leads to increased

commitments abroad, as well as resource

plans, and target market distances. The

members of the Nordic school of thought

study internationalization through the

prism of the market, where the innovation

school considers that each new step in the

process is an organizational innovation for

the company.

The internationalization process can

be seen as a learning process for an MSME.

Several aspects regarding

internationalization such as the age of

MSMEs, the size of MSMEs, and the

industrial sector selected by MSMEs have

become the subject of studies that have

been carried out by several researchers in

other countries. The MSME

internationalization strategy needs to pay

attention to the personality aspect, because

it will be very influential in determining the

work performance of MSMEs in carrying

out the MSME internationalization strategy.

With the right strategy, it is hoped that

MSME internationalization activities

through networks to improve welfare can

be realized and have competitiveness.

897 | Internationalization Of Msmes Through Networks (Networking) To Improve Welfare

CONCLUSIONS

The“internationalization of MSMEs is

an effort to improve the economy of the

community. The government pays

attention to the creation of MSMEs and

Cooperatives under the Ministry of

Cooperatives and MSMEs.

This attention is a form of appreciation

from the government, because MSMEs are

able to support the economic existence of

the small people and have a direct impact

on the level of life of the lower class so that

the welfare of the community continues to

increase.

The internationalization of MSMEs

cannot be separated from the network of

business partners as partners to be

competitive in global trade, so as to be able

to provide wide employment opportunities

and improve welfare. Thus, MSMEs are

known as a means of alleviating people

from poverty, leveling the economic level of

the poor, and providing foreign exchange

income for the country.

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