Digital Transformation and MSME Growth in the Modern Economy

Abstract

Digital transformation has become a key factor in enhancing efficiency, innovation, and competitiveness, particularly for Micro, Small, and Medium Enterprises. Through the adoption of technologies such as Artificial Intelligence, the Internet of Things, Cloud Computing, and Big Data, Micro, Small, and Medium Enterprises are able to expand market reach, increase productivity, and create new business models that are adaptive to global dynamics. This study employs a literature review method to examine recent academic works on the role of digital technologies in fostering economic growth and strengthening the contribution of Micro, Small, and Medium Enterprises to Gross Domestic Product. The findings highlight that digitalization can reinforce the business ecosystem by improving operational efficiency, enhancing customer relationships, and driving data-based innovation. Nevertheless, several challenges remain, including the digital divide, data security risks, and the potential reduction of traditional labor, all of which must be addressed through inclusive government policies and supportive regulations. This study emphasizes that digital transformation is not merely a technical instrument but rather a strategic foundation for sustainable economic development.