Analysis of the Government's Role in Promoting Innovation Readiness in Micro, Small, and Medium-sized Industries in Indonesia

In the context of Indonesia's evolving economic landscape, this study delves into the critical issue of innovation readiness within its Micro, Small, and Medium-sized Enterprises (MSMEs) sector. Recognizing the significant role of governments in fostering innovation, this research aims to comprehensively analyze the government's contributions to enhancing innovation readiness in Indonesian MSMEs. Employing a qualitative research approach, this study investigates government policies, regulatory frameworks, and collaborative initiatives with industry associations and research institutions. The findings illuminate the effectiveness of these interventions and provide valuable insights for policymakers and stakeholders striving to bolster Indonesia's economic development and competitiveness through innovation support in the MSME sector


INTRODUCTION
In recent years, the global economy has undergone significant transformations, marked by an increasing reliance on innovation as a key driver of economic growth and competitiveness (Mehrabi et al., 2019;Palacios-Marques et al., 2013;VanHoose et al., 2021).Innovation has become a critical factor for the survival and success of businesses, particularly in the context of micro, small, and medium-sized enterprises (MSMEs) in emerging economies like Indonesia.The role of governments in fostering innovation readiness among MSMEs has gained prominence as they recognize the potential of these enterprises to stimulate economic development and create jobs (Appiah et al., 2019;Doh & Kim, 2014;Hanafizadeh et al., 2012;Kang & Park, 2012;Mai et al., 2023;Taneo et al., 2017).
Despite the recognition of the importance of innovation in MSMEs, Indonesia faces a considerable innovation gap in this sector.According to the World Bank (2020), Indonesia ranks lower than several of its regional counterparts in terms of innovation readiness and competitiveness.This gap poses a significant challenge to the country's goal of achieving sustainable economic growth (Pasetto & Giacomello, 2023;Solomon & van Klyton, 2020;Wan et al., 2022).
To understand the dynamics of government intervention in promoting innovation readiness, this study draws upon the innovation systems theory (Belousova et al., 2020).This theoretical framework views innovation as a complex process influenced by various actors and institutions within a national innovation system.In the context of MSMEs, the government is a central actor, responsible for creating a conducive environment that facilitates innovation (Cenamor et al., 2019a;D'Amato, 2020;Doh & Kim, 2014).
The existing literature on the role of governments in promoting innovation readiness in MSMEs highlights several key aspects.First, scholars such as Tan et al., (2019) emphasize the importance of government policies and programs that provide financial incentives and support mechanisms for MSMEs engaged in innovative activities.Second, research by Damanpour (1991) underscores the role of government in shaping the regulatory environment, intellectual property rights, and innovation-related infrastructure.Third, studies like Kahle et al., (2020) emphasize the need for collaborative efforts between governments, industry associations, and research institutions to build innovation networks.Against this backdrop, the primary objective of this research is to analyze the government's role in promoting innovation readiness in micro, small, and medium-sized industries in Indonesia.

METHOD Research Approach and informant
For this qualitative research, we adopted a case study approach, which allows for an indepth exploration of the government's role in promoting innovation readiness in Indonesian MSMEs.Case studies provide a holistic understanding of a complex phenomenon within its reallife context (Baxter Pamela & Jack, 1990).Our study involved a purposive sampling strategy to select informants who possess a comprehensive understanding of the subject matter.Key informants included government officials responsible for formulating and implementing policies related to MSMEs and innovation, representatives from industry associations, and researchers actively engaged in the innovation ecosystem in Indonesia.Their diverse perspectives and experiences ensured a rich dataset (Dekker et al., 2020).

Data Collection Techniques
1. We employed multiple data collection methods to triangulate information and enhance the reliability and validity of our findings.These methods included: 2. Semi-structured Interviews: In-depth interviews were conducted with key informants to gather insights into the government's role in promoting innovation readiness.Open-ended questions allowed informants to share their experiences, opinions, and perceptions (Mishra & Alok, 2022).3. Document Analysis: We reviewed government policy documents, reports, and industry-related publications to complement interview data.This document analysis helped to contextualize the government's initiatives and actions (Hardin, 2008).4. Observation: Observations were conducted during relevant government-sponsored events, industry association meetings, and innovation-related workshops to gain a first-hand understanding of collaborative initiatives and interactions (Creswell & Creswell, 2017).

Data Analysis
Qualitative data analysis involved a systematic process of coding and thematic analysis.The following steps were followed: 1. Data Coding: Transcribed interviews and document excerpts were coded using a combination of open coding and axial coding techniques.This process allowed for the identification of key themes related to government interventions and their impact on innovation readiness (Creswell & Creswell, 2017).2. Data Categorization: Codes were organized into categories and subcategories to establish a comprehensive framework for analysis.This framework helped in understanding the relationships between different elements (Miles et al., 2014).3. Thematic Analysis: Thematic analysis involved identifying patterns, trends, and recurring themes within the data.This phase enabled the extraction of meaningful insights about the government's role in promoting innovation readiness in Indonesian MSMEs.

Result
The research findings reveal a multifaceted picture of the government's role in promoting innovation readiness within the micro, small, and medium-sized industries (MSMEs) of Indonesia.While government policies and programs have indeed played a significant role in fostering innovation within the sector, their effectiveness varies.Financial incentives and support mechanisms have been generally well-received, but regulatory frameworks and intellectual property rights protection require further refinement to encourage innovation activities.Collaboration between the government, industry associations, and research institutions has shown promise in building innovation networks, yet the full potential of these initiatives remains unrealized due to some operational challenges.These insights highlight the need for a more nuanced and coordinated approach to enhance the government's contribution to innovation readiness in Indonesian MSMEs, ultimately contributing to the country's economic development and global competitiveness.
The multifaceted nature of the government's role in promoting innovation readiness within Indonesia's micro, small, and medium-sized industries (MSMEs) underscores both its successes and areas that require improvement.Government policies and programs have undoubtedly made significant strides in fostering innovation within this sector.However, their effectiveness is not uniform across the board.
Financial incentives and support mechanisms have generally been well-received by MSMEs.These incentives have provided vital resources and incentives for entrepreneurs and small businesses to invest in research and development, adopt new technologies, and explore innovative solutions to industry challenges.This positive response highlights the importance of continued financial support as a means to stimulate innovation within the MSME sector.
On the other hand, there are challenges that need to be addressed in the realm of regulatory frameworks and intellectual property rights protection.For innovation to thrive, MSMEs must have confidence in their ability to protect their intellectual property and reap the benefits of their innovative efforts.Thus, there is a clear need for further refinement and strengthening of intellectual property rights protection mechanisms to provide MSMEs with the security they require to engage in innovative activities.
Furthermore, collaboration between the government, industry associations, and research institutions has shown promise in building innovation networks.These networks can facilitate knowledge sharing, technology transfer, and collaborative research efforts that drive innovation forward.However, operational challenges have hindered the full realization of these initiatives.Addressing these challenges, such as bureaucratic red tape or logistical obstacles, is crucial to fully harness the potential of these collaborative efforts.
In light of these insights, it becomes evident that a more nuanced and coordinated approach is necessary to enhance the government's contribution to innovation readiness in Indonesian MSMEs.This approach should include not only the provision of financial incentives but also the refinement of regulatory frameworks and intellectual property protection mechanisms.Additionally, efforts to streamline and improve collaboration between government bodies, industry associations, and research institutions should be prioritized.
By taking a more holistic and strategic approach, the government can better support and nurture innovation within the MSME sector.This, in turn, will contribute significantly to Indonesia's economic development and enhance its global competitiveness in an increasingly innovation-driven world.Ultimately, a thriving ecosystem of innovative MSMEs will not only benefit the businesses themselves but also the broader economy and society as a whole.

Discussion
The analysis of the government's role in promoting innovation readiness within Indonesia's micro, small, and medium-sized industries (MSMEs) reveals a complex landscape that has farreaching implications for the country's economic development and global competitiveness.Government policies and programs have played a significant role in fostering innovation within this sector (Cenamor et al., 2019a;Dibrell et al., 2008).These initiatives have been instrumental in providing financial incentives and support mechanisms to MSMEs, which have generally been well-received and have stimulated innovation activities (Annamalah et al., 2023;Kahle et al., 2020).
However, the effectiveness of government intervention varies across different aspects of innovation readiness.While financial incentives have been successful, regulatory frameworks and intellectual property rights protection require further refinement (Gomes & Wojahn, 2017;Lu et al., 2020;Sastararuji et al., 2022).Strengthening intellectual property rights is essential to instill confidence among MSMEs in protecting their innovative ideas and inventions (Beckmann et al., 2016;Begum et al., 2020).
Furthermore, collaborative efforts between the government, industry associations, and research institutions have shown promise in building innovation networks, yet operational challenges have hindered their full potential (Cenamor et al., 2019b).Streamlining and improving the collaboration process, such as reducing bureaucratic hurdles and addressing logistical issues, is crucial to realizing the full benefits of these initiatives (Gherghina, 2020).

Implication and Future Research
The implications drawn from the analysis of the government's role in promoting innovation readiness in micro, small, and medium-sized industries (MSMEs) in Indonesia have significant ramifications for policy and practice.First and foremost, it is imperative for the Indonesian government to refine and enhance its regulatory frameworks and intellectual property rights protection mechanisms (Anggadwita et al., 2021;Hutahayan & Yufra, 2019).Strengthening these aspects will not only provide MSMEs with the necessary confidence to engage in innovative activities but also attract foreign investment and collaboration partners who seek a secure environment for innovation (Taneo et al., 2020).
Furthermore, the government should consider a more targeted and strategic allocation of financial incentives and support mechanisms, recognizing that a one-size-fits-all approach may not be optimal (Ahmad et al., 2019;Hutahayan & Yufra, 2019;Osman et al., 2022;Taneo et al., 2020).Tailoring incentives to specific sectors or types of innovation can maximize their impact and ensure that limited resources are used effectively.Additionally, efforts to streamline and improve collaboration between government bodies, industry associations, and research institutions should be a priority (Băzăvan, 2019).This can be achieved through the reduction of bureaucratic hurdles and the establishment of clear communication channels.
In the long term, the government's commitment to fostering innovation within MSMEs will contribute to the country's economic development and global competitiveness (Wonglimpiyarat & Yuberk, 2005).It will create an environment where Indonesian MSMEs can thrive, compete on a global scale, and drive technological advancements.Ultimately, these measures will position Indonesia as a more attractive destination for innovation-driven businesses and investors.

CONCLUSION
The analysis of the government's role in promoting innovation readiness in Indonesia's micro, small, and medium-sized industries (MSMEs) underscores both the positive impact and areas that necessitate improvement.While government policies and financial incentives have played a pivotal role in stimulating innovation activities within the sector, regulatory frameworks and intellectual property rights protection require further refinement to provide a secure environment for innovation.Collaboration between the government, industry associations, and research institutions holds promise but faces operational challenges that must be addressed.Overall, a more nuanced, targeted, and coordinated approach is crucial to enhance the government's contribution to innovation readiness in Indonesian MSMEs, thereby fostering economic growth and global competitiveness.