The Influence of SMEs Characteristics on Business Development

Siska Aprianti

, Bainil Yulina

, Sulaiman

Department of Accounting, State Polytechnic of Sriwijaya, Palembang, Indonesia

Keywords: Small and medium enterprises, development of SMEs

Abstract: This study aims to determine the effect of the characteristics of small and medium enterprises which consist

of business origin, capital origin, business duration and the number of workers on the development of small

and medium enterprises. The sample was all owners of Small Business entrepreneurs of tajung weaving

Crafts in Tuan Kentang Area Palembang, totaling 32 entrepreneurs. The analytical method used is multiple

linear regressions. The results showed that the variables of business origin, business duration and the

number of workers had a significant influence on the business development of small and medium

enterprises tajung weaving in Tuan Kentang Area Palembang, while the variable capital origin does not

have an influence on business development.

1 INTRODUCTION

Micro, Small and Medium Enterprises (SMEs) are

an important and large sector of contribution in

realizing national economic development goals,

such as economic growth, employment

opportunities, increased foreign exchange, and

regional economic development. SMEs have an

important role in increasing economic growth in

Indonesia. SMEs are able to survive in the midst of

a crisis that has hit Indonesia in 1997, and even

today. The existence of MSMEs has been the source

of life for most Indonesians. This makes MSMEs

continue to survive during the economic crisis.

The development of small and medium

enterprises in Indonesia cannot be separated from

various problems. Common problems faced by small

and medium entrepreneurs such as limited working

capital, difficulties in raw materials, limited

technology, human resources with good quality,

information, and marketing (Astuti and Widiatmo in

Kristian, 2010) and (Martini, Zulkifli, Hartati, &

Armaini, 2018). It was further explained that the

weakness of small businesses in Indonesia was

caused by a combination of various factors, not only

the limitations of human resources, technology,

capital, and information, but also because of the lack

of support from the government and the lack of

willingness of national small and medium

entrepreneurs to be globally oriented (Martini,

Thoyib, & Periansya, 2018).

There are many types of businesses run by

SMEs, and one type of business is craft. Crafting is

one of the most reliable arts of use in export needs.

Most crafts are influenced by the cultural heritage of

the local community. Handicrafts are things that are

related to handmade or activities related to goods

produced through hand skills (handicrafts). Crafts

made are usually made of various materials. One of

the handicraft centers in the city of Palembang is

located in the Tuan Kentang Region, as one of the

major handicraft industry centers in Palembang City.

Various kinds of craft products are made here, for

example, tajung weaving, songket, and jumputan

fabrics. The high public interest in these craft

products should be a driver for SMEs to grow and

develop.

In the process, there are several SMEs that can

develop and then become successful, but not a few

who experience failure or not even operate. Based

on previous research (Kusuma, 2013); (Kristiningsih

and Trimarjono, 2014) and (Martini, Thoyib, &

Periansya, 2018) it was argued that the success of

SMEs was influenced by several factors, both those

from entrepreneurs and from the SMEs themselves.

According to Storey (Indiarti and Langenberg, 2004)

it can be seen from the characteristics of

entrepreneurs, characteristics of SMEs, and

contextual variables.

Therefore, in this study researchers want to re-

examine what factors influence the development of

small businesses especially in the tajung weaving in

Aprianti, S., Yulina, B. and Sulaiman, .

The Inﬂuence of SMEs Characteristics on Business Development.

DOI: 10.5220/0009152200002500

In Proceedings of the 2nd Forum in Research, Science, and Technology (FIRST 2018), pages 43-48

ISBN: 978-989-758-574-6; ISSN: 2461-0739

Tuan Kentang Area Palembang. Thus, the results of

this study are expected to be used by businesses to

break down the power they possess in order to

achieve significant business development, and can

also be used by the government to be used as one of

the bases for policy and regulation making that

supports the development of small businesses. So

the formulation of the problem in this study is

whether the characteristics of small and medium

businesses consisting of business origin, capital

origin, business duration, and business size have an

influence on the development of small and medium

enterprises, especially in small and medium

enterprises tajung weaving in Tuan Kentang Area

Palembang.

2 LITERATURE REVIEW

2.1 Small and Medium Enterprises

(SMEs)

Based on Law number 20 of 2008 concerning

SMEs, small businesses are stand-alone productive

economic enterprises carried out by individuals or

business entities that are not subsidiaries or not

branches of companies owned, controlled, or be part

of either directly or indirectly from a medium-sized

business or large business that has a capital of Rp 50

million to Rp 500 million.

Whereas the Indonesian Central Bureau of

Statistics in (Kristiningsih and Trimarjono, 2014)

defines small businesses with the size of the

workforce, namely 5 to 19 people consisting

(including) paid laborers, owner-workers, and

family workers. Whereas medium-sized businesses

are having a size of workers between 20-100 people

The types of small and medium businesses that

may be entered in Indonesia (Lupiyoadi, 2004)

include:

1. The service business services business today is

the largest and fastest growing in the small

business world. Services also bring enormous

benefits to small businesses that are able to

innovate high. For example car rental,

management consultants, internet services, and

others.

2. Retail Business Retail business is a form of small

business that is occupied by small and medium

entrepreneurs. Retail business is the only business

that sells manufacturing products directly to

consumer stores.

3. Distribution Business Just like service and retail

businesses, small and medium entrepreneurs have

begun to dominate all sales in large quantities.

This business is the only business that buys goods

from factories or producers and sells to retailers.

4. Agriculture is perhaps the oldest form of small

business. At first agricultural products were used

to meet the needs of themselves and their

families, but over time it became a sizeable

business because of the dependence of one

another. An example of this is that some farmers

need land and some need tools and some are in

need of workers.

5. The manufacturing business is a small business

that requires capital for a large investment

compared to four other types of business because

it requires labor, technology, and raw materials to

operate it. Examples: Handicrafts, printing, and

others.

Every type of business naturally wants to reach a

point called success. The success of a business can

be measured through performance measurement.

The intended performance is the level of

achievement of results or the level of achievement

of organizational goals (Kristiningsih and

Trimarjono, 2014). Success or failure in

entrepreneurship is influenced by several factors.

According to Storey in (Indiarti and Langenberg,

2004), it can be seen from the characteristics of

entrepreneurs, characteristics of SMEs, and

contextual variables.

Sutrisno and Lestari (2006), based on business

development, SMEs are grouped into several

criteria, namely: 1) Livelihood Activities, are Small

and Medium Enterprises that are used as job

opportunities to earn a living, which is more

commonly known as the informal sector such as

street vendors; 2) Micro-Enterprise is a SME that

has the nature of craftsmen but does not have the

entrepreneurial nature; 3) Small dynamic enterprise

is a SME that has an entrepreneurial spirit and is

able to accept subcontracting and export work; 4)

Fast moving enterprise is a SME that has an

entrepreneurial spirit and will transform into a big

business.

2.2 Characteristics of SMEs

Characteristics of SMEs can be of several things,

including company origin, time of operation,

business size, and source of business capital.

Smallboe, Leigh and North (1995) in a small

business the owner usually also doubles as a

company manager, the company's objectives can be

FIRST 2018 - 2nd Forum in Research, Science, and Technology (FIRST) – International Conference

determined from lifestyle and family awareness

factors in trading.

Capital Resources for Small and Medium

Enterprises. Mahon (2001) found a large

dependence between sources of funds originating

from outside the business and better company

growth.

Length of operation, the length of time a

business has been established is connected with the

learning curve. Older players may have learned a lot

from their experience compared to new players.

Kristiansen, Furuholt, and Wahid (2003) found that

the length of time a company operates has an

important effect on business success.

Small and Medium Business Size. The business

scale shows the amount of business in terms of the

number of workers owned. Mahon (2002) found that

business scale is connected with better company

performance. Larger scale companies usually have a

greater level of success.

The framework in this study can be described as

figure 1.

Figure 1: Framework

3 RESEARCH METHODOLOGY

3.1 Types and Data Sources

This study uses primary was collected through

questionnaires and direct interviews with

respondents who were based as owners or managers

of tajung weaving in Palembang Tuan Kentang Area

a number of 33 owners of tajung weaving. The

questionnaire contains two parts, the first section

contains the entrepreneur's identity which includes

the owner's age, gender, level of education and work

experience, while the second part contains

characteristics of SMEs consisting of business

origin, capital origin, business duration, and

business size. Secondary data is data obtained from

library data, journals, information, from relevant

government agencies to strengthen primary data

obtained from respondents.

3.2 Operational Definition of Research

Variables

Business Origin shows, where the company

originated is measured by an ordinal scale. If owned

is given a value of 1, if it comes from family

inheritance is given a value of 2, besides it is given a

value of 3.

Capital Origin: where the source of capital

comes from is obtained from measured by an ordinal

scale. If your own capital is given a value of 1, if the

capital comes from a combination, it is given a value

of 2 and if the capital comes from a third party is

given a value of 3.

Business Duration: shows the length of time that

an SME has operated, seen from the number of

years the company has been operating, measured by

an ordinal scale.

Business Size: shows how much the area (size)

of a business, judging from the total number of

employees owned, is measured by an ordinal scale.

Dependent variables that include the growth of

small and medium enterprises, which are assessed

from the development/decline of SME business

turnover in 2017 compared to last year, 2016. The

dependent variable is measured using an ordinal

scale.

3.3 Data Processing Techniques

The data analysis method used a computer program,

namely the Statistical Package for Social Science.

Before being tested, a series of classical assumption

tests consisting of data normalization tests,

multicollinearity tests, heteroscedasticity tests were

conducted and correlation test.

Development of Small and

Medium Enterprises (Y)

Business Characteristics

Business Origin (X1)

Capital Origin (X2)

Business Duration (X3)

Business Size (X4)

The Inﬂuence of SMEs Characteristics on Business Development

4 RESULTS AND DISCUSSION

4.1 Results

4.1.1 F Test

The F test is used to examine the effect of

independent variables consisting of the origin of the

business, the origin of the capital, the length of

business, and the number of workers together on the

dependent variable on business development.

Testing is done by using a significance level of 0.05

(α = 5%). Acceptance or rejection of hypotheses is

carried out with the following criteria:

1. If the value is significant f < 0.05, then H0 is

rejected or Ha is accepted which means the

regression coefficient is significant, meaning that

there is a significant influence between all

independent variables on the dependent variable.

2. If the value is significant f > 0.05, then H0 is

accepted or Ha is rejected which means the

regression coefficient is not significant. This

means that all independent variables have no

effect on the dependent variable.

The statistical F test result has an F-count of

8,107 with a significance value of 0.000, it means

the significance level of < 5% (α = 0.05) and F

count of 2,714 > F-table of 2.690 which means it

can be concluded that simultaneous business origin

variable, capital origin, length of business, and

number of workers have a significant effect on

business development

4.1.2 T Test

T test is used to determine the effect of independent

variables on the dependent variable and the t-test is

used to see the effect individually or partially. T-test

is done by comparing T count with T table with

significant rate of 5%: 2 = 2.5 (two-sided test) with

degrees of freedom (df) = nk-1 or 32-4-1 = 28 two-

sided testing (significant = 0.025) obtained results

for T table is 2.045.

Based on the statistical T test result, it can be

seen in the coefficients column that there is a sig

value of 0,000. The sig value is smaller than the

0.05 probability value, or the value of 0.039 < 0.05.

The variable X1 has t count that is 2.189 with t table

2.048. So it can be concluded that the first

hypothesis test (H1) is accepted. This means that

partially independent variables, namely business

origin have a positive and significant effect on the

dependent variable, namely business development.

Based on the statistical T test result, there is a sig

value of 0,000. The sig value is smaller than the

0.05 probability value, or the value of 0.289 > 0.05.

The variable X2 has t count that is 1.080 with t table

2.048. So it can be concluded that the second

hypothesis (H2) is rejected. This means that partially

the independent variable that is capital origin does

not affect the dependent variable, namely business

development.

Based on the statistical T test result, it can be

seen in the coefficients column that there is a sig

value of 0,000. The sig value is smaller than the

0.05 probability value, or 0.009 < 0.05. The X3

variable has a t count of 2.812 with t table 2.048. So

it can be concluded that the first hypothesis testing

(H3). This means that partially the independent

variables namely business duration have a positive

and significant effect on the dependent variable

namely business development.

It can be seen in the coefficients column that

there is a sig value of 0,000. The sig value is smaller

than the 0.05 probability value, or 0.001 < 0.05. The

X4 variable has a t count of 3.627 with t table 2.048.

So it can be concluded that the testing of the first

hypothesis (H4) is accepted. Partially the

independent variable, namely the number of

workers, has a positive and significant effect on the

dependent variable, namely business development.

4.2 Discussion

4.2.1 The Effect of Business Origin on Small

and Medium Business Development

The partial test results show that the variables of

business origin, have a positive and significant

effect on business development. Factors related to

the characteristics of SMEs such as the origin of the

company whether from a family company or the

pure idea of the owner turned out to affect the

development of SMEs. Individuals who have strong

confidence and confidence will determine the

personal success in entrepreneurship.

Individual attitudes that are good at making

entrepreneurial decisions are the determinants of the

success of entrepreneurs. Because habits are deeply

rooted, business decisions are made as they are

based on existing experience. But the attitude of

individuals who want to learn and increase

knowledge will determine the success of SMEs

because individuals who want to learn will gain new

FIRST 2018 - 2nd Forum in Research, Science, and Technology (FIRST) – International Conference

experiences that ultimately lead to entrepreneurial

success.

4.2.2 The Effect of Capital Origin on Small

and Medium Business Development

The variables from capital do not have an influence

on business development. Capital is a number of

funds/money needed to finance daily needs

(Riyanto, 2005). Capital has a significant influence

on business development, because the greater the

capital used and the easier it is to get capital, the

business will also experience an increase and

business development (Purwanti, 2013).

This means that having an influence on business

development is the amount or size of capital, and not

where the capital comes from. This means that

wherever capital is sourced from its own capital or

joint capital from family/friends/other partners, even

capital from third parties does not affect business

development.

The capital of tajung weaving entrepreneurs in

the Tuan Kentang Area Palembang mostly uses

capital sourced from their own capital. According to

Kasmir (2011), own capital is capital obtained from

the owner of the company/entrepreneur by issuing

personal money. The advantage of using your own

capital to finance a business is that there is no

interest expense or profit sharing.

4.2.3 The Effect of Business Duration on

Small and Medium Business

Development

The business duration variable has a positive and

significant effect on business development. It can be

understood that in accordance with the

characteristics of SMEs, many of which are small-

scale businesses have the ability to increase sales.

So they will try for years or just stand up and try to

increase their turnover to the maximum.

4.2.4 the Effect of Business Size on Small

and Medium Business Development

The variable size of the business proxied by the

number of employees has a positive and significant

effect on business development. Labor is every

person who is able to do work to produce goods and

or services both to fulfill their own needs and for the

community (Law number 13 of 2003).

The number of workers has a significant effect

on the level of income of SMEs. This is because

whatever amount of labor in the production process

will affect the amount of income, it's just that if the

number of workers is small, it will take a long time

in the production process while a large amount of

labor will facilitate the production process.

Increasing the number of workers will be able to

increase production output. With the increase in

output, the SME profit level will also increase. The

factor of labor productivity is a factor of production

that cannot be separated from the production of

goods and services. Labor has an important role in

increasing the growth of production value. In SME

production activities, the workforce contributes to

output through quantity and quality.

5 CONCLUSIONS

Simultaneously the business origin, capital origin,

length of business, and size of the business proxied

by the number of workers have a significant effect

on business development.

Partially the business origin variable has a

positive and significant effect on the business

development. That business development is

influenced by the factors from which the business

originates.

The capital origin has no effect on the business

development. This means that where capital comes

from whether it is its own capital or capital

originating from a combination with other funds or

capital from third parties, it does not have an

influence on the development of the business.

The business duration has a positive and

significant effect on the business development. This

means that the longer a small and medium-sized

business operates, the smaller and medium-sized

businesses will grow.

The business size proxied by the number of

workers have a positive and significant effect on the

business development. This means that the greater

the number of workers owned by small and medium

businesses in SMEs, the smaller and medium

businesses will grow.

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