The Influence of Innovation, Capital, and Public Purchasing Power on the Growth of MSMEs in Dumai City

Abstract

Micro, Small, and Medium Enterprises (MSMEs) play a strategic role in supporting national economic growth because they are capable of creating jobs, increasing community income, and strengthening regional economic resilience. The city of Dumai, as a coastal area with a strategic position on the Malacca Strait trade route, has great potential for developing the MSME sector. However, MSME growth in this city has not been optimal due to limited capital, low innovation, and fluctuations in people's purchasing power, which affect business stability. This study aims to analyze the influence of innovation, business capital, and people's purchasing power on MSME growth in Dumai City. The study uses a quantitative descriptive approach with a population of 24,227 MSMEs and a sample of 100 respondents determined using the Slovin formula with a 10% error rate. Primary data was obtained through questionnaires administered to MSME actors, while secondary data was sourced from government agencies and related official documents. Data analysis was performed using multiple linear regression using SPSS version 26 software. The results show that innovation, business capital, and people's purchasing power have a positive and significant effect on MSME growth with a coefficient of determination (R²) of 88.2%. This means that these three variables simultaneously explain 88.2% of the variation in MSME growth, while the remaining 11.8% is influenced by other factors outside the model. These findings confirm that increasing innovation, the availability of capital, and strengthening community purchasing power are key factors in driving the growth of competitive and sustainable MSMEs that contribute to strengthening the local economy in Dumai City.