Bridging the Digital Divide: The Role of Local Governments in Fostering SME Digitalization at the Border

Abstract

Abstract

This study evaluates and compares the digital readiness of Small and Medium Enterprises (SMEs) in the border regions of Bengkalis, Indonesia, and Muar, Malaysia, amid the rise of Industry 4.0. It aims to measure technological adoption, assess drivers and barriers of digital transformation, and examine local ecosystem roles in supporting SME digitalization across two administratively distinct but connected regions. Despite regional efforts toward digital economies, border-area SMEs remain underexplored, particularly in digital preparedness and cross-border integration. Using a quantitative comparative method, structured questionnaires were distributed to 100 SMEs—50 in each area. Data were analyzed through descriptive statistics, t-tests, and correlation analyses to identify readiness gaps in infrastructure, skills, strategy, and external support. The research provides valuable insights for policymakers, development agencies, and academics to bridge digital divides and enhance SME competitiveness. Findings will inform targeted interventions through Penta-helix collaboration involving government, academia, private sector, media, and communities. Ultimately, the study highlights the need for localized digital strategies that consider socio-economic and cultural differences across borders.

Keywords : Digital Readiness, SMEs, Border Economy, Cross-Country Comparison