Development of MSMEs: The Relationship Between Digital Literacy and Digital Transformation

Abstract

In the digital era, both individual and organizational activities have undergone significant changes due to advancements in digital technology. Micro, Small, and Medium Enterprises (MSMEs), as providers of products or services, must keep pace with these developments to offer the best services to customers. Digital transformation has become imperative for MSMEs to adapt to the current digital era, facilitating the development and creation of new processes, systems, and business models to drivecompetitiveness and skill development. The ability to leverage digital resources presents a challenge for MSMEs in digital transformation, making digital literacy a critical factor in optimizing the use of digital resources. This research explores the relationship between digital literacy and digital transformation among MSME business actors. The research employs a quantitative methodology. Respondents are MSMEs selected through purposive sampling. The research subjects consisted of 65 MSME business actors with MSME characteristics within the Bangka Belitung Islands province and had a number of workers ranging from 1-99 people. Data collection methods use Likert scales, anddata analysis is performed using correlation tests. The results show a correlation coefficient (rxy) of 0.839 with a significance value of 0.000 (p < 0.01). The coefficient of determination (R2) is 0.704, indicating that digital literacy contributes 70.4% to digital transformation. This study reveals a positiverelationship between digital literacy and digital transformation among MSME business actors in the Bangka Belitung Islands Province. The research provides broader insights for MSME actors in Indonesia to enhance digital literacy and digital transformation to navigate market changes and advancements better.

Keywords: digital literacy, digital transformation, MSMEs