The Impact of Social and Political Capital on the Sustainability of MSMEs in the Era of Economic and Digital Disruption

2.1 Social capital

Social capital is a social resource that is seen as an investment to obtain new resources [7]. It is known that something called a resource is something that can be used for consumption, storage, and investment. The resources used for investment are referred to as capital. The capital dimension is quite broad and complex [8].

In the social capital of cooperatives and combined MSMEs, the emphasis is more on group potential, patterns of relationships between individuals in a group in social networks, norms, values and beliefs between each other that are born from group members and become group norms [9]. Therefore, social capital can be one of the main components in driving togetherness, mobility of ideas, trust, and mutual benefit to achieve mutual progress. In cooperatives and MSME associations, social capital [10] is needed to build relationships that can be used as strength in facing the Era of Economic & Digital Disruption, social capital is a resource that arises from the results of interactions within a community, both between individuals and institutions that give birth to emotional bonds in the form of trust, reciprocal relationships, and social networks, values, and norms that shape the structure of society. Social capital is useful for coordination and cooperation in achieving common goals. Indicators of social capital are (1) trust, (2) joint action, (3) responsibility, and (4) having a network.

2.2 Political capital

Political capital [11] is the ability to influence someone in the form of resources to achieve expected goals. Political capital includes organization, connections, voting rights, the power of citizens to change norms and values into standards which are modified into rules, regulations and distribution of resources. what is needed to support the achievement of a goal, the indicators of political capital are (1) Organization, (2) Connections, and (3) Power.

2.3 Cooperatives

A cooperative is an economic organization owned and operated by someone for the common good. Cooperatives base their activities on the principles of the people's economic movement based on the principle of kinship. The indicators of cooperatives are (1) Good Institutional Performance, (2) Good Business Performance, (3) Good Organizational Performance, and (4) Cooperatives are very beneficial for members and the community.

2.4 MSME centers

MSME center is a certain area or location where there are a number of Micro Enterprises, Small Enterprises and Medium Enterprises that use the same raw materials or facilities, produce the same or similar products, and have prospects as centers for the development of Micro Enterprises [12], Small Enterprises and Businesses. Medium, the indicators for MSME centers are (1) Activity centers in one area, (2) Having the same business, (3) Having the same raw materials, (4) Having the same or similar products, (5) Having specialization in production process, (6) Economic activities are interrelated

2.5 MSME cluster

Groups or business clusters that are interrelated and have the potential [13] for synergy between them in the process mutual learning, utilization of facilities, access to development and utilization of resources (information, technology, raw materials, capital and markets). The indicators of the MSME cluster are (1) The existence of a group of industries, (2) The existence of dynamic social ties, (3) Collaboration increases efficiency and assets, (4) There is innovation in the industry, (5) Collaboration creates competitive advantage.

2.6 MSME group

A group formed by Micro Enterprises, Small Enterprises, and Medium Enterprises based on common needs and are in the same expanse or domicile that has an organizational structure [14]. The MSME group in question is based on the type of business owned, including (1) Furniture, (2) Handcraft, (3) Food/food processing, (4) Tourism, (5) Horticulture/plants, (6) Agriculture, (7) Convection, (8) Fisheries, and (9) Herbal medicine/traditional medicine.

2.7 Economic growth

Economic growth is an aspect that supports and increases the prosperity of the people in a country [15, 16]. The following financial changes are generally supported by technological developments and global market forces. Economic growth is a condition where the people of a country or region experience an increase in income which can be caused by an increase in the production of goods and services. The following developments in production quantities are generally caused by increasingly advanced technology, efficient business innovations and escalation of consumer interest in certain trends [17]. Apart from that, another definition of economic growth is a financial transfiguration procedure that is identical to natural resources, the number of commodities and the financial condition of a country. A situation that can be called economic growth is that the number of unemployed people is recorded as being less than that of workers and there are fewer people below the poverty line [18]. In this regard, one of the benefits that the government feels when economic growth occurs is that development and equitable distribution of community infrastructure can be implemented quickly because per capita income has soared. Apart from that, for MSMEs, economic growth is the first step to planning business expansion and sustainable resource development in the future [19].

Factors influencing a country's economic growth are: (1) Human resources are one of the factors that influence economic growth. The reason is that these elements can improve or actually harm a country's trading ability. If the quality of human resources decreases drastically, then the next event will be that the number of unemployed will increase rapidly, business bankruptcy will occur and then the poverty level will be much more worrying [20]; (2) The natural resources owned by the country influence the amount of demand for natural resources in the form of exports which greatly impacts the financial condition of the country. In this regard, it is necessary to understand that the amount of natural resource wealth must go hand in hand with an increase in human resources so that economic growth can be achieved. accomplished. An example of economic growth in this case is the balance of export strength and product quality. If companies gradually continue to make improvements, innovate and expand their business, then the condition of natural resources and human resources will move in balance; (3) Technological and educational developments need to be accelerated so that the production of goods or services becomes more efficient. Referring to changes in needs and styles in the global society which is now completely digital, the use of technology should be the Company's main focus; (4) The Inflation Rate and Interest Rates have an influence on economic growth, namely the inflation rate. If there is an increase in the price of raw materials, there will almost automatically be an increase in the company's operational needs. This situation will of course have an impact on employee salaries and most importantly create obstacles for companies. Apart from that, another aspect that determines economic growth [21] is the bank interest rate; (5) Managerial Personnel and Production Organization are important factors for economic growth, namely by using the method of implementing improvements to managerial personnel and production organization, production will increase and have an impact on increasing people's income so as to increase economic growth; (6) Running hand in hand, economic growth and the socio-cultural sector influence each other in their development. Basically, economic growth is based on community activities which include viewpoints, behavior, and even work motivation.

The characteristics of economic growth can be seen from (1) the level of national income, (2) an increase in real income per capita, (3) an increase in population income, (4) an increase in welfare, and (5) a decrease in the unemployment rate.

The results of the validity test can be seen from the construct confirmatory test as follows coefficient<0.05. The legitimacy test capabilities to test the degree to which the estimating instrument (instrument) utilized can quantify the markers or factors examined. there are 43 inquiries addressing all factors to be tried for quality. The consequences of the legitimacy and unwavering quality are 40 inquiries which are the examination instruments handled utilizing AMOS 20 with the arrangements that the instrument can be supposed to be substantial assuming that it has a connection coefficient <0.05. The consequences of the legitimacy test should be visible from the build corroborative test as follows coefficient<0.05, as mentioned in Table 3 below, that all indicators are good.

Table 3. Confirmation test results from research

Source: Data Processed

In view of Table 4, it is realized that every pointer shaping the variable shows results that meet the measures, in particular CR≥1.96 with likelihood≤0.05. Based on these findings, it is possible to assert that the variables' indicators are significant indicators of the research's factors, namely (1) Social Capital, (2) Political Capital, (3) Cooperatives, (4) MSME center, (5) MSME Group, (6) MSME cluster, and (7) Economic growth. As a result, we can conclude that the structure of the Impact of Social and Political Capital on the Sustainability of MSMEs in the Era of Economic and Digital Disruption can be accepted.

Table 4. Variable regression processing results

Source: Data processed

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Figure 3. Structural Equation Modeling (SEM) analysis

In Figure 3, Structural Equation Modeling (SEM) Analysis is used as quantitative analysis, as for hypothesis testing is by analyzing the value of the Critical Ratio (CR) and the Probability (P) value of the data processing results, compared with the required statistical limits, which are above 1.96 for the CR value and below 0.05 for the P value, if the data processing results show a value that meets these conditions, the proposed research hypothesis can be accepted, it can be seen in Table 4 that in this study eight hypotheses were proposed and showed values that met the requirements, for a discussion of each hypothesis is as follows:

(1) Will economic growth increase if SMEs utilize social capital in facing the era of economic and digital disruption with cooperatives as an intervening variable?

In view of the table in section P above, there is an expansion in financial development assuming that MSMEs use social capital in facing the era of economic and digital disruption with cooperatives on the intervening variables that produce CR 2.801>1.96 and P 0.004<0.05. Thus it can be said that MSMEs use social capital in facing the era of economic and digital disruption with cooperatives as an intervening variable that has a significant positive effect, namely Social capital or trust is needed by cooperatives to do business with the trust mechanism of existing members in cooperatives needed to do business.

(2) Will economic growth increase if SMEs utilize social capital in facing the era of economic and digital disruption with MSME centers as an intervening variable?

In view of the table in section P above, there is an expansion in financial development assuming that MSMEs use social capital in facing the era of economic and digital disruption with MSME Centers on the intervening variables that produce CR 4.477>1.96 and P 0.005<0.05. Thus it can be said that MSMEs use social capital in facing the era of economic and digital disruption with MSME centers as an intervening variable that has a significant positive effect, That is, social capital is needed in MSME centers with requirements for competition, especially on price, in MSME centers in the form of a system of togetherness with a division of labor that already exists in MSME centers so that MSMEs that are members of MSME centers have product specialization so that social capital is needed.

(3) Will economic growth increase if SMEs utilize social capital in facing the era of economic and digital disruption with economic clusters as intervening variables?

In view of the table in section P above, there is an expansion in financial development assuming that MSMEs use social capital in facing the era of economic and digital disruption with the MSME Cluster on the intervening variables that produce CR 0.342<1.96 and P-0.885<0.05. Thus it can be said that MSMEs use social capital in facing the era of economic and digital disruption with the MSME Cluster as an intervening variable that does not have a significant positive effect, namely Social capital is not needed in the MSME cluster because the MSME cluster has similar businesses and with various rules, the MSME cluster provide members to jointly build and grow MSME clusters.

(4) Will economic growth increase if SMEs utilize social capital in facing the era of economic and digital disruption with the MSME group as an intervening variable?

In view of the table in section P above, there is an expansion in financial development assuming that MSMEs use social capital in facing the era of economic and digital disruption with the MSME group on the intervening variables that produce CR 0.088<1.96 and P-1.053 <0.05. Thus it can be said that MSMEs use social capital in facing the era of economic and digital disruption with the MSME group as an intervening variable. There is no significant positive effect, namely social capital is not needed in the MSME group because the MSME group has not yet formed an organizational structure that is not binding so there is still competition in price.

(5) Will economic growth increase if SMEs utilize political capital in facing the era of economic and digital disruption with cooperatives as an intervening variable?

In view of the table in section P above, there is an expansion in financial development assuming that MSMEs use political capital in facing the era of economic and digital disruption with cooperatives on the intervening variables that produce CR 0.013<1.96 and P-0.004<0.05. Thus it can be said that MSMEs use political capital in facing the era of economic and digital disruption with cooperatives as an intervening variable. There is no significant positive effect, that is, cooperatives do not need political capital because cooperatives prioritize kinship so that members trust the management.

(6) Will economic growth increase if SMEs utilize political capital in facing the era of economic and digital disruption with MSME centers as an intervening variable?

In view of the table in section P above, there is an expansion in financial development assuming that MSMEs use political capital in facing the era of economic and digital disruption with cooperatives on the intervening variables that produce CR 2.486>1.96 and P 0.002<0.05. Thus it can be said that MSMEs use political capital in facing the era of economic and digital disruption with MSME centers as an intervening variable that has a significant positive effect, namely Political capital is needed for MSME centers to support the sustainability of MSME centers with political capital expected to cooperate with various parties and support to get a project.

(7) Will economic growth increase if SMEs utilize political capital in facing the era of economic and digital disruption with economic clusters as intervening variables?

In view of the table in section P above, there is an expansion in financial development assuming that MSMEs use political capital in facing the era of economic and digital disruption with the MSME cluster on the intervening variables that produce CR 4.445>1.96 and P 0,007<0.05. Thus it can be said that MSMEs use political capital in facing the era of economic and digital disruption with the MSME cluster as an intervening variable that does not have a significant positive effect, namely Political capital is not needed in the MSME cluster because the MSME cluster already has an organizational structure and there is already an agreement in implementing business together.

(8) Will economic growth increase if SMEs utilize political capital in facing the era of economic and digital disruption with the MSME group as an intervening variable?

In view of the table in section P above, there is an expansion in financial development assuming that MSMEs use political capital in facing the era of economic and digital disruption with the MSME group on the intervening variables that produce CR 2.936>1.96 and P 0.003<0.05. Thus it can be said that MSMEs use political capital in facing the era of economic and digital disruption with the MSME group as an intervening variable that has a significant positive effect, namely Political capital is needed for the progress of MSME groups to get various facilities in doing business together with groups, political capital in need as business continuity in obtaining various conveniences and various facilities in raising MSME groups.