Development of Innovative Products Based on Local Wisdom to Increase the Competitiveness of MSMEs
Abstract
Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in the economic development of many countries, including Indonesia. However, MSMEs often face challenges in enhancing competitiveness, especially in the global market. One potential solution lies in the development of innovative products based on local wisdom, which can add unique value and appeal. This study aims to explore how MSMEs can develop innovative products based on local wisdom to enhance their competitiveness. Specifically, it investigates the integration of local cultural values, traditional knowledge, and sustainable practices into product design and development processes within MSMEs. This research employs a qualitative case study approach, focusing on several MSMEs in Indonesia that have successfully incorporated local wisdom into their product offerings. Data was collected through interviews with business owners, product designers, and local community members, along with field observations. The study also analyzed secondary data from industry reports and market trends. The findings indicate that MSMEs that integrate local wisdom into their products can significantly improve their market differentiation and appeal. The study identifies key factors such as cultural authenticity, sustainable sourcing, and the ability to tell a compelling product story as essential to enhancing competitiveness.
Full text article
References
Aarstad, J., & Kvitastein, O. A. (2020). Enterprise R&D investments, product innovation and the regional industry structure. Regional Studies, 54(3), 366–376. https://doi.org/10.1080/00343404.2019.1624712
Abdel-Basst, M., Mohamed, R., & Elhoseny, M. (2020). A novel framework to evaluate innovation value proposition for smart product–service systems. Environmental Technology & Innovation, 20, 101036. https://doi.org/10.1016/j.eti.2020.101036
Cai, Z., Liu, H., Huang, Q., & Liang, L. (2019). Developing organizational agility in product innovation: The roles of IT capability, KM capability, and innovative climate. R&D Management, 49(4), 421–438. https://doi.org/10.1111/radm.12305
Chang, C. (2019). Do green motives influence green product innovation? T he mediating role of green value co?creation. Corporate Social Responsibility and Environmental Management, 26(2), 330–340. https://doi.org/10.1002/csr.1685
Chen, J., & Liu, L. (2020). Customer participation, and green product innovation in SMEs: The mediating role of opportunity recognition and exploitation. Journal of Business Research, 119, 151–162. https://doi.org/10.1016/j.jbusres.2019.05.033
Genç, E., & Benedetto, C. A. D. (2019). A comparison of proactive and reactive environmental strategies in green product innovation. International Journal of Innovation and Sustainable Development, 13(3/4), 431. https://doi.org/10.1504/IJISD.2019.100377
Guo, B., Paraskevopoulou, E., & Santamaría Sánchez, L. (2019). Disentangling the Role of Management Control Systems for Product and Process Innovation in Different Contexts. European Accounting Review, 28(4), 681–712. https://doi.org/10.1080/09638180.2018.1528168
Hamdi?Kidar, L., Keinz, P., Le Nagard, E., & Vernette, E. (2019). Comparing Lead Users to Emergent?Nature Consumers as Sources of Innovation at Early Stages of New Product Development. Journal of Product Innovation Management, 36(5), 616–631. https://doi.org/10.1111/jpim.12500
Hilbolling, S., Berends, H., Deken, F., & Tuertscher, P. (2020). Complementors as connectors: Managing open innovation around digital product platforms. R&D Management, 50(1), 18–30. https://doi.org/10.1111/radm.12371
Jiang, B., Na, J., Wang, L., Li, D., Liu, C., & Feng, Z. (2019). Eco-Innovation in Reusing Food By-Products: Separation of Ovalbumin from Salted Egg White Using Aqueous Two-Phase System of PEG 1000/(NH4)2SO4. Polymers, 11(2), 238. https://doi.org/10.3390/polym11020238
Karbowski, A. (2019). COOPERATIVE AND NON-COOPERATIVE R&D IN PRODUCT INNOVATION AND FIRM PERFORMANCE. Journal of Business Economics and Management, 20(6), 1121–1142. https://doi.org/10.3846/jbem.2019.11050
Khan, S. J., & Mir, A. A. (2019). Ambidextrous culture, contextual ambidexterity and new product innovations: The role of organizational slack and environmental factors. Business Strategy and the Environment, 28(4), 652–663. https://doi.org/10.1002/bse.2287
Kharub, M., & Sharma, R. (2020). An integrated structural model of QMPs, QMS and firm’s performance for competitive positioning in MSMEs. Total Quality Management & Business Excellence, 31(3–4), 312–341. https://doi.org/10.1080/14783363.2018.1427500
Kimseng, T., Javed, A., Jeenanunta, C., & Kohda, Y. (2020). Applications of Fuzzy Logic to Reconfigure Human Resource Management Practices for Promoting Product Innovation in Formal and Non-Formal R&D Firms. Journal of Open Innovation: Technology, Market, and Complexity, 6(2), 38. https://doi.org/10.3390/joitmc6020038
Li, S., Cheng, S., & Li, D. (2020). Dynamic control of a monopolist’s product and process innovation with reference quality. Applied Economics, 52(36), 3933–3950. https://doi.org/10.1080/00036846.2020.1725418
Liliani, Tjahjono, B., & Cao, D. (2020). Advancing bioplastic packaging products through co-innovation: A conceptual framework for supplier-customer collaboration. Journal of Cleaner Production, 252, 119861. https://doi.org/10.1016/j.jclepro.2019.119861
Liu, Y.-C., Lu, S.-J., Kao, C.-Y., Chung, L., & Tan, K. H. (2019). Comparison of AR and physical experiential learning environment in supporting product innovation. International Journal of Engineering Business Management, 11, 1847979019839578. https://doi.org/10.1177/1847979019839578
Liu, Z., Feng, J., & Wang, J. (2019). Effects of the Sharing Economy on Sequential Innovation Products. Complexity, 2019(1), 3089641. https://doi.org/10.1155/2019/3089641
Mahmud, M., Soetanto, D., & Jack, S. (2020). Environmental management and product innovation: The moderating role of the dynamic capability of small manufacturing firms. Journal of Cleaner Production, 264, 121633. https://doi.org/10.1016/j.jclepro.2020.121633
Marvel, M. R., Wolfe, M. T., & Kuratko, D. F. (2020). Escaping the knowledge corridor: How founder human capital and founder coachability impacts product innovation in new ventures. Journal of Business Venturing, 35(6), 106060. https://doi.org/10.1016/j.jbusvent.2020.106060
MUAFI, M. (2020). A Nexus among Strategic Orientation, Social Network, Knowledge Sharing, Organizational Innovation, and MSMEs Performance. The Journal of Asian Finance, Economics and Business, 7(6), 327–338. https://doi.org/10.13106/JAFEB.2020.VOL7.NO6.327
Papagiannakis, G., Voudouris, I., Lioukas, S., & Kassinis, G. (2019). Environmental management systems and environmental product innovation: The role of stakeholder engagement. Business Strategy and the Environment, 28(6), 939–950. https://doi.org/10.1002/bse.2293
Purwandari, B., Otmen, B., & Kumaralalita, L. (2019). Adoption Factors of E-Marketplace and Instagram for Micro, Small, and Medium Enterprises (MSMEs) in Indonesia. Proceedings of the 2019 2nd International Conference on Data Science and Information Technology, 111–116. https://doi.org/10.1145/3352411.3352453
Rojero-Jiménez, R., Gómez-Romero, J. G. I., & Quintero-Robles, L. M. (2019). El liderazgo transformacional y su influencia en los atributos de los seguidores en las Mipymes mexicanas. Estudios Gerenciales. https://doi.org/10.18046/j.estger.2019.151.3192
Saleem, H., Li, Y., Ali, Z., Mehreen, A., & Mansoor, M. S. (2020). An empirical investigation on how big data analytics influence China SMEs performance: Do product and process innovation matter? Asia Pacific Business Review, 26(5), 537–562. https://doi.org/10.1080/13602381.2020.1759300
Santos, A. C. O., Da Silva, C. E. S., Braga, R. A. D. S., Corrêa, J. É., & De Almeida, F. A. (2020). Customer value in lean product development: Conceptual model for incremental innovations. Systems Engineering, 23(3), 281–293. https://doi.org/10.1002/sys.21514
Sattari, S., Wessman, A., & Borders, L. (2020). Business model innovation for sustainability: An investigation of consumers’ willingness to adopt product-service systems. Journal of Global Scholars of Marketing Science, 30(3), 274–290. https://doi.org/10.1080/21639159.2020.1766369
Silva, G. M., Gomes, P. J., & Lages, L. F. (2019). Does importer involvement contribute to product innovation? The role of export market factors and intra-firm coordination. Industrial Marketing Management, 78, 169–182. https://doi.org/10.1016/j.indmarman.2017.05.008
Singh, M. P., & Roy, M. (2019). A study of sustainability reporting disclosures for manufacturing MSMEs: Evidence from India. International Journal of Entrepreneurship and Small Business, 38(4), 395. https://doi.org/10.1504/IJESB.2019.104135
Sipahi, E. (2020). COVID 19 and MSMEs: A revival framework. Research Journal in Advanced Humanities, 1(2), 7–21. https://doi.org/10.58256/rjah.v1i2.146
Song, W., Wang, G., & Ma, X. (2020). Environmental innovation practices and green product innovation performance: A perspective from organizational climate. Sustainable Development, 28(1), 224–234. https://doi.org/10.1002/sd.1990
Stefoska-Needham, A., & Tapsell, L. (2020). Considerations for progressing a mainstream position for sorghum, a potentially sustainable cereal crop, for food product innovation pipelines. Trends in Food Science & Technology, 97, 249–253. https://doi.org/10.1016/j.tifs.2020.01.012
Subawa, N. S., & Mimaki, C. A. (2019). An Empirical Study of E-Marketplace Acceptance by MSMEs in Bali using TOE Model. Proceedings of the 2019 2nd International Conference on E-Business, Information Management and Computer Science, 1–5. https://doi.org/10.1145/3377817.3377837
Taylor, N., & Noseworthy, T. J. (2020). Compensating for Innovation: Extreme Product Incongruity Encourages Consumers to Affirm Unrelated Consumption Schemas. Journal of Consumer Psychology, 30(1), 77–95. https://doi.org/10.1002/jcpy.1127
Wang, F., & Chen, K. (2020). Do product imitation and innovation require different patterns of organizational innovation? Evidence from Chinese firms. Journal of Business Research, 106, 60–74. https://doi.org/10.1016/j.jbusres.2019.08.046
Wang, Y., Wu, J., Zhang, R., Shafiee, S., & Li, C. (2020). A “User-Knowledge-Product” Co-Creation Cyberspace Model for Product Innovation. Complexity, 2020, 1–20. https://doi.org/10.1155/2020/7190169
Werder, K., Seidel, S., Recker, J., Berente, N., Gibbs, J., Abboud, N., & Benzeghadi, Y. (2020). Data-Driven, Data-Informed, Data-Augmented: How Ubisoft’s Ghost Recon Wildlands Live Unit Uses Data for Continuous Product Innovation. California Management Review, 62(3), 86–102. https://doi.org/10.1177/0008125620915290
Zhang, F., Sun, S., Liu, C., & Chang, V. (2020). Consumer innovativeness, product innovation and smart toys. Electronic Commerce Research and Applications, 41, 100974. https://doi.org/10.1016/j.elerap.2020.100974
Zhang, M., Qi, Y., Wang, Z., Zhao, X., & Pawar, K. S. (2019). Effects of business and political ties on product innovation performance: Evidence from China and India. Technovation, 80–81, 30–39. https://doi.org/10.1016/j.technovation.2018.12.002
Živojinovi?, I., Weiss, G., Wilding, M., Wong, J. L. G., & Ludvig, A. (2020). Experiencing forest products – An innovation trend by rural entrepreneurs. Land Use Policy, 94, 104506. https://doi.org/10.1016/j.landusepol.2020.104506
Authors
Copyright (c) 2025 Levon Galstyan, Aram Hakobyan, Leyla Guliyeva

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.