Creating a digital ecosystem for sustainable development: Insights from Indonesian micro, small and medium enterprises

Indonesia’s micro, small, and medium enterprises (MSMEs) are experiencing competitive contention with the development of information and communication technology-based businesses. However, MSMEs play a significant role in most developing countries due to their contributions to economic growth. The COVID-19 lockdown brought the economic constraints, yet it also has had a positive impact, the pandemic has become a catalyst to accelerate digital-based development. The novelty of this study lies in two aspects. First, substantively, is the use of a systems approach, especially the autopoietic concept in reading the development of a digital-based MSME system. Second, in terms of the object of study, the MSME system in the Special Region of Yogyakarta (DIY), Indonesia, and the development of digitalization are of course the strengths of this work. In this study, the researchers describe how the MSME system responds to environmental changes. Likewise, the autopoietic concept puts emphasis on self-referential, namely, the development of a system based on his own needs through communication, which will be closely related to the sustainability of the digital-based MSME system. From a systems perspective, the resonance capability of the system in the digital ecosystem will also be detected. The study employed a qualitative approach. Using MSMEs in the DIY as a case study, this article aims to describe these enterprises’ dynamic responses to the growth of digital technology as well as their role in forming a digital ecosystem. An in depth-interview was used to collect data from selected participants from both MSME and government actors. The findings reveal that the sustainability of the MSME system in DIY is determined by the internal systems’ responses to the latest advances in digital technology as well as the ecological quality of the system, especially as related to the resonance of MSMEs’ subsystem. Autopoietic mechanisms are represented through the communication discourses of system-forming elements covered by support from the government, business, and higher education sectors as well as the local community. However, problems are still evident, so the integration and synergy of the digital MSME ecosystem diverse elements are necessary to ensure sustainable development in the future. © 2023 Kasetsart University.