The Impact of Product Innovation and Digital Financial Inclusion on The Financial Performance of Smes With Human Capital as a Moderator

Abstract

Purpose: This study aims to determine the effect of product innovation, digital financial inclusion, and human capital on the financial performance of MSMEs.

Method: This study used a quantitative approach with primary data collection through the distribution of Google Form based questionnaires to MSME actors in the Special Region of Yogyakarta. Of the total 213 respondents who filled out the questionnaire, 194 data sets were deemed suitable for use as research samples.

Finding: The results show that product innovation and digital financial inclusion have a positive and significant effect on the financial performance of MSMEs in Yogyakarta. Both factors are able to increase competitiveness, productivity, and financial stability of businesses. Meanwhile, human capital does not play a role as a moderating variable in both relationships. The quality of MSME human resources, which is still focused on basic operational capabilities, makes it unable to optimally support innovation and the use of digital financial services.

Novelty: The integration of digital financial inclusion variables into an analytical model that examines the financial performance of MSMEs. Different from previous studies that focused more on financial literacy, technology adoption, or digital innovation in general, this study specifically includes digital financial inclusion.