The Effects of Innovative Competence, Tax Compliance, and Adaptive Capability on the Sustainability of MSMEs

Dominica Jatu Novenariya Griya Rahayu; Yunizar Yunizar

doi:10.59261/inkubis.v8i3.390

Authors

Dominica Jatu Novenariya Griya Rahayu Universitas Padjadjaran, Indonesia
Yunizar Yunizar Universitas Padjadjaran, Indonesia

DOI:

https://doi.org/10.59261/inkubis.v8i3.390

Keywords:

Business Sustainability, Innovative Competence, Tax Compliance, Adaptive Capability, Technology Digitalization, MSMEs, SEM-PLS

Abstract

Background: Business sustainability remains a critical challenge for MSMEs amid increasing competition and rapid digital transformation. Although internal capabilities are recognized as key determinants of sustainability, the role of technology digitalization in strengthening these capabilities remains insufficiently explored, particularly among MSME taxpayers in Indonesia.

Objective: This study aims to examine the effects of innovative competence, tax compliance, and adaptive capability on the business sustainability of MSME taxpayers in Bandung City and to analyze the moderating role of technology digitalization in these relationships.

Methods: This study employed a quantitative approach using a survey method involving 478 MSME taxpayers in Bandung City selected through purposive sampling. Data were collected through a structured Likert-scale questionnaire and analyzed using Structural Equation Modeling–Partial Least Squares (SEM-PLS) with SmartPLS 4.

Results: The findings indicate that innovative competence (β = 0.272; p < 0.001), tax compliance (β = 0.143; p < 0.001), adaptive capability (β = 0.258; p < 0.001), and technology digitalization (β = 0.188; p < 0.001) have significant positive effects on business sustainability. However, technology digitalization does not significantly moderate the relationships between innovative competence, tax compliance, adaptive capability, and business sustainability. The model explains 36.4% of the variance in business sustainability (R² = 0.364).

Conclusion: The sustainability of MSME taxpayers in Bandung City is primarily driven by internal capabilities, including innovative competence, tax compliance, and adaptive capability. Strengthening these factors is essential to enhance MSME resilience and long-term sustainability in an increasingly dynamic business environment

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