Strategic Determinants of MSME Sustainability: Market Competition Mediation and Institutional Regulation Moderation Effects

Ariefah Sundari; Meithiana Indrasari; Sukesi Sukesi

doi:10.62794/je3s.v7i1.343

Authors

Ariefah Sundari Darul Ulum Islamic University, Indonesia
Meithiana Indrasari Dr. Soetomo University, Indonesia
Sukesi Dr. Soetomo University, Indonesia

DOI:

https://doi.org/10.62794/je3s.v7i1.343

Keywords:

circular economy, inclusive partnership, institutional regulation, market competition, MSME sustainability

Abstract

This study examines the strategic determinants of MSME sustainability in East Java by investigating the effects of credit facilities, digital marketing, innovation strategy, pricing strategy, distribution strategy, circular economy, and inclusive partnerships. Market competition is positioned as a mediating variable, while institutional regulation acts as a moderating variable. A quantitative explanatory research design was employed using survey data collected from 396 MSMEs selected through simple random sampling across East Java. Data were analyzed using Structural Equation Modeling–Partial Least Squares (SEM-PLS). The findings reveal that credit facilities, digital marketing, innovation strategy, pricing strategy, distribution strategy, circular economy practices, and inclusive partnerships significantly influence MSME sustainability. Market competition mediates the relationship between strategic factors and sustainability, indicating that competitive dynamics enhance the effectiveness of internal business strategies. Institutional regulation also moderates the relationship between market competition and sustainability by supporting a fair and conducive business environment. These findings demonstrate that MSME sustainability is determined by the interaction of strategic capabilities, competitive market conditions, and supportive institutional frameworks.

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