Local Product Development Strategy Through Social Commerce Approach in MSMEs

Abstract

Local product development is the key to sustainability for MSMEs (Micro, Small, and Medium Enterprises) in the midst of an increasingly competitive era of digital transformation. Social commerce has become a strategic approach that allows MSMEs to utilize social interactions to increase customer engagement and product innovation. However, despite the enormous potential of social commerce, many MSMEs have not been able to fully integrate their capabilities with the effectiveness of product innovation, which is often caused by a lack of understanding of the relationship between the underlying strategic factors. This study aims to analyze the relationship between Social Commerce Capability, Customer Engagement, Perceived Value, Product Innovation, and Organizational Readiness in supporting local product development strategies in MSMEs. The research method uses Structural Equation Modeling (SEM) operated through the SmartPLS 4.0 tool to test the causal relationship between variables. Data were collected from 135 respondents who are MSME owners and managers who actively use social commerce platforms in Indonesia. Respondents were selected using a purposive sampling method to ensure representation of relevant MSME actors. The results show that Social Commerce Capability has a significant effect on Customer Engagement, which in turn enhances Product Innovation. In addition, Perceived Value was found to positively moderate the relationship between Customer Engagement and Product Innovation. These findings also emphasize the importance of Organizational Readiness in facilitating more effective social commerce adoption. This study contributes to the literature on local product development through social commerce and provides practical recommendations for MSMEs in maximizing product innovation for long-term competitiveness.