Bridging Innovation and Digitalization: The Critical Role of Digital and Financial Literacy in Indonesian SME’s

Abstract

This study examines how digital and financial literacy support the digital transformation of Indonesian SMEs. It explores the roles of owners’ attitudes toward digital innovation, business complexity, growth orientation, government intervention, and business networking in influencing SMEs’ digital intensity, with digital and financial literacy serving as mediating factors. Using a quantitative approach and Structural Equation Modeling (SEM), data were collected from SMEs across Indonesia. The findings show that owners’ attitudes toward digital innovation, growth orientation, and business networking significantly enhance SMEs’ digital intensity through digital literacy, while business complexity and government intervention do not. Through financial literacy, growth orientation, government intervention, and business networking also have significant positive effects on digital intensity, whereas business complexity remains insignificant. Overall, the results highlight the crucial role of digital and financial literacy in accelerating the digital transformation and competitiveness of Indonesian SMEs.