The Role of SMEs in Promoting Decent Work and Sustainable Economic Growth
Keywords:
SME capability, sustainable business practices, decent work creation, sustainable economic growth, SDG 8
Abstract
Small and Medium Enterprises (SMEs) play an important role in supporting inclusive economic development; however, challenges remain in transforming business growth into quality employment and sustainable economic outcomes. This study aims to examine the role of SME capability and sustainable business practices in promoting decent work creation and sustainable economic growth within the Sustainable Development Goal 8 (SDG 8) framework. A quantitative research design was applied using a structured questionnaire distributed to 30 SME owners/managers selected through purposive sampling. Data were analyzed using Structural Equation Modeling Partial Least Squares (SEM-PLS) with SmartPLS to evaluate the relationships among SME capability, sustainable business practices, decent work creation, and sustainable economic growth. The results indicate that SME capability and sustainable business practices positively influence decent work creation and sustainable economic growth, while decent work creation significantly contributes to sustainable economic growth. The findings also confirm that decent work acts as a partial mediating mechanism between SME-related factors and economic sustainability. This study implies that strengthening SME capabilities and implementing sustainable business practices can support better employment conditions and contribute to the achievement of inclusive and sustainable economic development.
References
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Crossley, R. M., Elmagrhi, M. H., & Ntim, C. G. (2021). Sustainability and legitimacy theory: The case of sustainable social and environmental practices of small and medium‐sized enterprises. Business Strategy and the Environment, 30(8), 3740–3762. https://doi.org/10.1002/bse.2837
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Grassmann, M. (2021). The relationship between corporate social responsibility expenditures and firm value: The moderating role of integrated reporting. Journal of Cleaner Production, 285, 124840. https://doi.org/10.1016/j.jclepro.2020.124840
Hakim, M. T., & Fuad, F. (2024). IMPACT OF ESG REGULATIONS ON SUSTAINABLE BUSINESS PRACTICES: EVIDENCE FROM INDONESIA. JURNAL AKUNTANSI DAN AUDITING, 21(2), 247–253. https://doi.org/10.14710/jaa.21.2.247-253
Hanaysha, J. R., Al-Shaikh, M. E., Joghee, S., & Alzoubi, H. M. (2022). Impact of Innovation Capabilities on Business Sustainability in Small and Medium Enterprises. FIIB Business Review, 11(1), 67–78. https://doi.org/10.1177/23197145211042232
Inegbedion, H. E., Thikan, P. R., David, J. O., Ajani, J. O., & Peter, F. O. (2024). Small and medium enterprise (SME) competitiveness and employment creation: The mediating role of SME growth. Humanities and Social Sciences Communications, 11(1), 11. https://doi.org/10.1057/s41599-023-02434-y
Isensee, C., Teuteberg, F., Griese, K.-M., & Topi, C. (2020). The relationship between organizational culture, sustainability, and digitalization in SMEs: A systematic review. Journal of Cleaner Production, 275, 122944. https://doi.org/10.1016/j.jclepro.2020.122944
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Kale, C., & Gökçek, M. (2020). A techno-economic assessment of landfill gas emissions and energy recovery potential of different landfill areas in Turkey. Journal of Cleaner Production, 275, 122946. https://doi.org/10.1016/j.jclepro.2020.122946
Kutaula, S., Chowdhury, S., Gillani, A., Budhwar, P. S., & Dey, P. K. (2025). Linking HRM with Sustainability Performance Through Sustainability Practices: Unlocking the Black Box. British Journal of Management, 36(2), 615–632. https://doi.org/10.1111/1467-8551.12861
Lestari, E. D., Abd Hamid, N., Shamsuddin, R., Kurniasari, F., & Yaacob, Z. (2024). Investigating the factors of SMEs’ business resilience in the post-pandemic crisis of COVID-19 with technology adoption as a quasi-moderator: A multigroup analysis of Indonesian and Malaysian SMEs. Cogent Business & Management, 11(1), 2301135. https://doi.org/10.1080/23311975.2023.2301135
Lüdeke‐Freund, F. (2020). Sustainable entrepreneurship, innovation, and business models: Integrative framework and propositions for future research. Business Strategy and the Environment, 29(2), 665–681. https://doi.org/10.1002/bse.2396
Lukovszki, L., Rideg, A., & Sipos, N. (2021). Resource-based view of innovation activity in SMEs: An empirical analysis based on the global competitiveness project. Competitiveness Review: An International Business Journal, 31(3), 513–541. https://doi.org/10.1108/CR-01-2020-0018
Malesios, C., De, D., Moursellas, A., Dey, P. K., & Evangelinos, K. (2021). Sustainability performance analysis of small and medium sized enterprises: Criteria, methods and framework. Socio-Economic Planning Sciences, 75, 100993. https://doi.org/10.1016/j.seps.2020.100993
Ponto, V. M. (2023). Peningkatan Produktivitas Dalam Rangka Mewujudkan Pekerjaan Layak dan Pertumbuhan Ekonomi (Tujuan ke-8 Sustainable Development Goals). Cendekia Niaga, 7(1), 85–96. https://doi.org/10.52391/jcn.v7i1.792
Rai, S. M., Brown, B. D., & Ruwanpura, K. N. (2019). SDG 8: Decent work and economic growth – A gendered analysis. World Development, 113, 368–380. https://doi.org/10.1016/j.worlddev.2018.09.006
Sari, Y., Oktarina, Y., Munajat, & Kenamon, M. (2022). The Role of Innovation Capability in MSME Sustainability During the Covid-19 Pandemic. International Journal of Social Science and Business, 6(4), 502–511. https://doi.org/10.23887/ijssb.v6i4.46158
Sinaga, J., Anggraeni, E., & Slamet, A. S. (2021). THE EFFECT OF SUPPLY CHAIN MANAGEMENT PRACTICES AND INFORMATION AND COMMUNICATION TECHNOLOGY ON COMPETITIVE ADVANTAGE AND FIRM PERFORMANCE (CASE STUDY: SMEs OF PROCESSED FOOD IN JAKARTA). Indonesian Journal of Business and Entrepreneurship. https://doi.org/10.17358/ijbe.7.1.91
Singh, S. K., Del Giudice, M., Chiappetta Jabbour, C. J., Latan, H., & Sohal, A. S. (2022). Stakeholder pressure, green innovation, and performance in small and medium‐sized enterprises: The role of green dynamic capabilities. Business Strategy and the Environment, 31(1), 500–514. https://doi.org/10.1002/bse.2906
Siregar, M. Y., Warsani Purnama Sari, Ahmad Prayudi, & Alfifto. (2025). Increasing the MSMEs performance through cutting edge innovation capability. Jurnal Siasat Bisnis, 41–57. https://doi.org/10.20885/jsb.vol29.iss1.art4
Trinugroho, I., Pamungkas, P., Wiwoho, J., Damayanti, S. M., & Pramono, T. (2022). Adoption of digital technologies for micro and small business in Indonesia. Finance Research Letters, 45, 102156. https://doi.org/10.1016/j.frl.2021.102156
Yacob, P., Peter, D., & Chin, K. S. (2022). Sustainable business practices in manufacturing SMEs: The mediating effect of dynamic capabilities. International Social Science Journal, 72(243), 73–89. https://doi.org/10.1111/issj.12303
Yudi Prastiwi, N. L. P. E., Widnyani, N. M., & Adnyani, L. A. (2023). Competency-Based Human Resource Management: Application for SMES. Jurnal Ilmiah Manajemen Dan Bisnis, 8(1), 43–50. https://doi.org/10.38043/jimb.v8i1.4337
Zaman, M., Tanewski, G., & Ekanayake, G. (2025). What does sustainability mean for small and medium enterprises: A systematic literature review. Journal of Cleaner Production, 492, 144830. https://doi.org/10.1016/j.jclepro.2025.144830
Abid, N., Dowling, M., Ceci, F., & Aftab, J. (2023). Does resource bricolage foster SMEs’ competitive advantage and financial performance? A resource‐based perspective. Business Strategy and the Environment, 32(8), 5833–5853. https://doi.org/10.1002/bse.3451
Abisuga-Oyekunle, O. A., Patra, S. K., & Muchie, M. (2020). SMEs in sustainable development: Their role in poverty reduction and employment generation in sub-Saharan Africa. African Journal of Science, Technology, Innovation and Development, 12(4), 405–419. https://doi.org/10.1080/20421338.2019.1656428
Acs, Z. J., Song, A. K., Szerb, L., Audretsch, D. B., & Komlósi, É. (2021). The evolution of the global digital platform economy: 1971–2021. Small Business Economics, 57(4), 1629–1659. https://doi.org/10.1007/s11187-021-00561-x
Al Idrus, S., Abdussakir, A., Al Idrus, S., Supriyanto, A. S., Ahmar, A. S., & Kamaluddin, K. (2023). Effect of government role and human resource competence on level of success of small and medium enterprises in East Java province with business performance as mediation variable. Jurnal Ekonomi Modernisasi, 19(1), 1–14. https://doi.org/10.21067/jem.v19i1.8033
Arsawan, I. W. E., Koval, V., Rajiani, I., Rustiarini, N. W., Supartha, W. G., & Suryantini, N. P. S. (2022). Leveraging knowledge sharing and innovation culture into SMEs sustainable competitive advantage. International Journal of Productivity and Performance Management, 71(2), 405–428. https://doi.org/10.1108/IJPPM-04-2020-0192
Aust, I., Matthews, B., & Muller-Camen, M. (2020). Common Good HRM: A paradigm shift in Sustainable HRM? Human Resource Management Review, 30(3), 100705. https://doi.org/10.1016/j.hrmr.2019.100705
Chigbu, B. I., & Nekhwevha, F. (2023a). Exploring the concepts of decent work through the lens of SDG 8: Addressing challenges and inadequacies. Frontiers in Sociology, 8, 1266141. https://doi.org/10.3389/fsoc.2023.1266141
Chigbu, B. I., & Nekhwevha, F. (2023b). Exploring the concepts of decent work through the lens of SDG 8: Addressing challenges and inadequacies. Frontiers in Sociology, 8, 1266141. https://doi.org/10.3389/fsoc.2023.1266141
Crossley, R. M., Elmagrhi, M. H., & Ntim, C. G. (2021). Sustainability and legitimacy theory: The case of sustainable social and environmental practices of small and medium‐sized enterprises. Business Strategy and the Environment, 30(8), 3740–3762. https://doi.org/10.1002/bse.2837
Danil, L., Jahroh, S., Syarief, R., & Taryana, A. (2026). Entrepreneurship model in start-ups on a pathway to achieving sustainable development goal (SDG) 8. Journal of Open Innovation: Technology, Market, and Complexity, 12(2), 100780. https://doi.org/10.1016/j.joitmc.2026.100780
Grassmann, M. (2021). The relationship between corporate social responsibility expenditures and firm value: The moderating role of integrated reporting. Journal of Cleaner Production, 285, 124840. https://doi.org/10.1016/j.jclepro.2020.124840
Hakim, M. T., & Fuad, F. (2024). IMPACT OF ESG REGULATIONS ON SUSTAINABLE BUSINESS PRACTICES: EVIDENCE FROM INDONESIA. JURNAL AKUNTANSI DAN AUDITING, 21(2), 247–253. https://doi.org/10.14710/jaa.21.2.247-253
Hanaysha, J. R., Al-Shaikh, M. E., Joghee, S., & Alzoubi, H. M. (2022). Impact of Innovation Capabilities on Business Sustainability in Small and Medium Enterprises. FIIB Business Review, 11(1), 67–78. https://doi.org/10.1177/23197145211042232
Inegbedion, H. E., Thikan, P. R., David, J. O., Ajani, J. O., & Peter, F. O. (2024). Small and medium enterprise (SME) competitiveness and employment creation: The mediating role of SME growth. Humanities and Social Sciences Communications, 11(1), 11. https://doi.org/10.1057/s41599-023-02434-y
Isensee, C., Teuteberg, F., Griese, K.-M., & Topi, C. (2020). The relationship between organizational culture, sustainability, and digitalization in SMEs: A systematic review. Journal of Cleaner Production, 275, 122944. https://doi.org/10.1016/j.jclepro.2020.122944
Issue Information – TOC. (2021a). International Labour Review, 160(1). https://doi.org/10.1111/ilr.12170
Issue Information – TOC. (2021b). International Labour Review, 160(2). https://doi.org/10.1111/ilr.12171
Kale, C., & Gökçek, M. (2020). A techno-economic assessment of landfill gas emissions and energy recovery potential of different landfill areas in Turkey. Journal of Cleaner Production, 275, 122946. https://doi.org/10.1016/j.jclepro.2020.122946
Kutaula, S., Chowdhury, S., Gillani, A., Budhwar, P. S., & Dey, P. K. (2025). Linking HRM with Sustainability Performance Through Sustainability Practices: Unlocking the Black Box. British Journal of Management, 36(2), 615–632. https://doi.org/10.1111/1467-8551.12861
Lestari, E. D., Abd Hamid, N., Shamsuddin, R., Kurniasari, F., & Yaacob, Z. (2024). Investigating the factors of SMEs’ business resilience in the post-pandemic crisis of COVID-19 with technology adoption as a quasi-moderator: A multigroup analysis of Indonesian and Malaysian SMEs. Cogent Business & Management, 11(1), 2301135. https://doi.org/10.1080/23311975.2023.2301135
Lüdeke‐Freund, F. (2020). Sustainable entrepreneurship, innovation, and business models: Integrative framework and propositions for future research. Business Strategy and the Environment, 29(2), 665–681. https://doi.org/10.1002/bse.2396
Lukovszki, L., Rideg, A., & Sipos, N. (2021). Resource-based view of innovation activity in SMEs: An empirical analysis based on the global competitiveness project. Competitiveness Review: An International Business Journal, 31(3), 513–541. https://doi.org/10.1108/CR-01-2020-0018
Malesios, C., De, D., Moursellas, A., Dey, P. K., & Evangelinos, K. (2021). Sustainability performance analysis of small and medium sized enterprises: Criteria, methods and framework. Socio-Economic Planning Sciences, 75, 100993. https://doi.org/10.1016/j.seps.2020.100993
Ponto, V. M. (2023). Peningkatan Produktivitas Dalam Rangka Mewujudkan Pekerjaan Layak dan Pertumbuhan Ekonomi (Tujuan ke-8 Sustainable Development Goals). Cendekia Niaga, 7(1), 85–96. https://doi.org/10.52391/jcn.v7i1.792
Rai, S. M., Brown, B. D., & Ruwanpura, K. N. (2019). SDG 8: Decent work and economic growth – A gendered analysis. World Development, 113, 368–380. https://doi.org/10.1016/j.worlddev.2018.09.006
Sari, Y., Oktarina, Y., Munajat, & Kenamon, M. (2022). The Role of Innovation Capability in MSME Sustainability During the Covid-19 Pandemic. International Journal of Social Science and Business, 6(4), 502–511. https://doi.org/10.23887/ijssb.v6i4.46158
Sinaga, J., Anggraeni, E., & Slamet, A. S. (2021). THE EFFECT OF SUPPLY CHAIN MANAGEMENT PRACTICES AND INFORMATION AND COMMUNICATION TECHNOLOGY ON COMPETITIVE ADVANTAGE AND FIRM PERFORMANCE (CASE STUDY: SMEs OF PROCESSED FOOD IN JAKARTA). Indonesian Journal of Business and Entrepreneurship. https://doi.org/10.17358/ijbe.7.1.91
Singh, S. K., Del Giudice, M., Chiappetta Jabbour, C. J., Latan, H., & Sohal, A. S. (2022). Stakeholder pressure, green innovation, and performance in small and medium‐sized enterprises: The role of green dynamic capabilities. Business Strategy and the Environment, 31(1), 500–514. https://doi.org/10.1002/bse.2906
Siregar, M. Y., Warsani Purnama Sari, Ahmad Prayudi, & Alfifto. (2025). Increasing the MSMEs performance through cutting edge innovation capability. Jurnal Siasat Bisnis, 41–57. https://doi.org/10.20885/jsb.vol29.iss1.art4
Trinugroho, I., Pamungkas, P., Wiwoho, J., Damayanti, S. M., & Pramono, T. (2022). Adoption of digital technologies for micro and small business in Indonesia. Finance Research Letters, 45, 102156. https://doi.org/10.1016/j.frl.2021.102156
Yacob, P., Peter, D., & Chin, K. S. (2022). Sustainable business practices in manufacturing SMEs: The mediating effect of dynamic capabilities. International Social Science Journal, 72(243), 73–89. https://doi.org/10.1111/issj.12303
Yudi Prastiwi, N. L. P. E., Widnyani, N. M., & Adnyani, L. A. (2023). Competency-Based Human Resource Management: Application for SMES. Jurnal Ilmiah Manajemen Dan Bisnis, 8(1), 43–50. https://doi.org/10.38043/jimb.v8i1.4337
Zaman, M., Tanewski, G., & Ekanayake, G. (2025). What does sustainability mean for small and medium enterprises: A systematic literature review. Journal of Cleaner Production, 492, 144830. https://doi.org/10.1016/j.jclepro.2025.144830
Published
2026-10-11
How to Cite
Irham Maulana Trie Chutsi, & Dien Mardhiyah. (2026). The Role of SMEs in Promoting Decent Work and Sustainable Economic Growth . International Journal of Economics, Business and Innovation Research, 5(06), 884-903. https://doi.org/10.63922/ijebir.v5i06.6738
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Email : ijebir@citakonsultindo.or.id / editor.ijebir@gmail.com
