Buffering MSMEs Against Economic Shocks: The Synergistic Role of Tax Incentives, Financial Digitalization, and Operational Efficiency in Indonesia

Rizal (Halu Oleo University Kendari, Indonesia)

Journal of Scientific Research, Education, and Technology
Vol. 5 No. 4 (2026): Vol. 5 No. 4 2026

This study aims to analyze the effect of tax incentives, financial digitalization, and operational cost efficiency on the resilience of Micro, Small, and Medium Enterprises (MSMEs) in Indonesia, while also testing the mediating role of financial digitalization in the relationship between tax incentives and MSME resilience. Using balanced panel data from 34 Indonesian provinces during the period 2017-2024 (272 observations), this study applies the Random Effect Model (REM) for the first path equation and the Fixed Effect Model (FEM) for the second path equation based on the results of the Chow Test and the Hausman Test, supplemented by the Sobel Test to test the mediation effect. The results show that partially, tax incentives have no significant effect on financial digitalization (coefficient = 0.2502; p = 0.6328), financial digitalization has a significant negative effect on MSME resilience (coefficient = -0.0045; p = 0.0000), and operational cost efficiency has a positive and strong significant effect on MSME resilience (coefficient = 0.3527; p = 0.0000). Simultaneously, all three variables significantly influenced MSME resilience (F = 21.0829; p = 0.0000). The mediating effect of financial digitalization was not proven significant (Z = -0.4752; p = 0.6346), because the path from tax incentives to financial digitalization was not significant even though the path from financial digitalization to MSME resilience was significant. The R-square (within) value of 21.21% in the second path equation indicates that this model has quite good explanatory power regarding the variation in MSME resilience over time within one province. The findings regarding the negative impact of financial digitalization emphasize the need for a more cautious policy approach, which not only encourages the adoption of financial technology alone, but also ensures the readiness of managerial capabilities and financial literacy of MSMEs so that the benefits of digitalization can truly be converted into business resilience.