Track: Business Management

Abstract

Small and Medium Enterprises (SMEs) are the backbone of Indonesia's industry, so their development is very important for the government. One of the efforts of the West Nusa Tenggara regional government to help the SMEs is development through facilitating the STIP entrepreneurial incubator, where STIP aims to help the problems faced by SMEs, such as the provision of the latest facilities and machines, training for SMEs, as well as exposure and marketing assistance, to encourage the performance of SMEs. This is very important in the context of the ongoing COVID-19 pandemic, which has resulted in many SMEs experiencing productivity erosion that threatens their sustainability of SMEs. However, support from the government is not always enough for SMEs because there is a gap between what is provided by the government and what the business needs, and there is an absorptive capacity factor that is an important determinant in determining how successful the business incubation program is. Therefore, an evaluation is needed to determine whether government assistance has been effective in improving the performance of SMEs, which is the purpose of this study with the Structural Equation Modeling – Partial Least Square (SEM-PLS) method. The results showed that there was a significant influence of government business support services and absorptive capacity moderation on SME performance, with proposals to improve the implementation of the absorptive capacity development framework in the entrepreneurial incubation program.