Digital Transformation of MSMEs: Inclusion, Readiness, and Innovation Toward a Sustainable Economic Ecosystem

Abstract

This study evaluates the interrelationship between digital readiness, digital inclusion, and digital transformation on business model innovation and the sustainability of local economies among culinary Micro, Small, and Medium Enterprises (MSMEs) in Medan, Indonesia. Employing a quantitative approach grounded in the TOE Framework and the Digital Ecosystem Innovation Model (DEIM), data were gathered from 250 respondents via closed-ended questionnaires and analyzed using Structural Equation Modeling with Partial Least Squares (SEM-PLS). The findings indicate that both digital readiness and digital inclusion significantly influence business model innovation. Moreover, the digital business ecosystem serves as a mediating variable that links digital transformation with sustainable economic outcomes. The practical implications of this research emphasize the importance of community-based digital empowerment strategies and inclusive policy interventions to foster equitable technological adoption.