This study examines three key objectives: (1) whether the challenges faced by micro and small enterprises (MSEs) motivate them to form partnerships, (2) the impact of partnerships on firm productivity, and (3) the causal relationship between productivity and exports. Specifically, the research seeks to determine if productivity drives exports, if exports enhance productivity, or if both directions apply.
Using annual survey data from 58,290 micro and small manufacturing firms collected by Indonesia’s Central Statistics Agency (BPS) in 2015, the study applies Propensity Score Matching (PSM) to address endogeneity and selection bias in measuring partnership impacts on productivity. Further, Structural Equation Modeling (SEM) with logit regression is used to analyze whether perceived problems influence partnership and training decisions, while Two-Stage Least Squares (2SLS) estimation investigates the simultaneity between productivity and exports.
The findings show that capital and raw material constraints strongly encourage partnerships, both in general and specific forms. In contrast, marketing challenges only influence general partnerships, and workforce skill issues have little effect on partnership or training decisions. Importantly, partnerships are found to significantly boost productivity. Moreover, the 2SLS results confirm a bidirectional relationship between productivity and exports, highlighting how productivity and global market participation reinforce each other.
👉 Read the full article here to explore the detailed findings and their implications for policymakers and practitioners.