Drivers of the Smart Green Economy in Rural Settings: An Empirical Study on Local Wisdom, ICT, and the Mediating Role of Entrepreneurship
Abstract
This study provides local governments with critical insights into the role of Micro, Small, and Medium Enterprises (MSMEs) in advancing smart green economies within smart villages, particularly through the lenses of local wisdom, Information and Communication Technology (ICT), and entrepreneurship. Drawing on a sample of 142 MSME participants, the study employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to analyze the relationships among key variables. Findings reveal that the interplay between local economic practices, ICT adoption, and entrepreneurial capacity significantly influences the development of a smart green economy. Notably, integrating indigenous knowledge with digital technologies emerges as a pivotal driver of economic transformation. Local wisdom and knowledge shape products and services' unique character and cultural value, helping communities stand out and grow their economies. When people in these communities use digital tools, especially the internet, in their businesses, it opens up new opportunities and encourages innovation. Still, having strong entrepreneurial skills is key. They do not directly drive the economy, but they help connect traditional wisdom and modern technology in ways that make growth possible. It demonstrates the importance of blending traditional heritage with innovation to create a thriving, sustainable future for rural areas.
References
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[40] Singh, S., Sindhav, B., Eesley, D., & Bhowmick, B. (2018). Investigating the role of ICT intervention in grassroots innovation using structural equation modelling approach. Sādhanā, 43(7): 104. DOI: 10.1007/s12046-018-0909-8
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[45] Tosida, E., Herdiyeni, Y., Marimin, M., & Suprehatin, S. (2022). Investigating the effect of technology-based village development towards smart green economy: An application of variance-based structural equation modeling. International Journal of Data and Network Science, 6(3). DOI: 10.5267/j.ijdns.2022.3.002
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[2] Anuyahong, B., Pengnate, W., & Rattanapong, C. (2023). The relationship of executive’s leadership skills in 21st century towards staff’s work performance in Thailand. International Journal of Finance Economics and Business, 2(3): 205–217.
[3] Aryani, R. (2019). Entrepreneurship Learning Model Based on Local Wisdom for Increasing Student Creative Business. Indonesian Journal of Contemporary Education, 1(1): 24–31. DOI: 10.33122/ijoce.v1i1.7
[4] Bigliardi, B., Ferraro, G., Filippelli, S., & Galati, F. (2021). The past, present and future of open innovation. European Journal of Innovation Management, 24(4): 1130–1161. DOI: 10.1108/EJIM-10-2019-0296
[5] Brenner, B. (2018). Transformative Sustainable Business Models in the Light of the Digital Imperative - A Global Business Economics Perspective. Sustainability, 10(12): 4428. DOI: 10.3390/su10124428
[6] Carayannis, E. G., Dezi, L., Gregori, G., & Calo, E. (2022). Smart Environments and Techno-centric and Human-Centric Innovations for Industry and Society 5.0: A Quintuple Helix Innovation System View Towards Smart. Sustainable, and Inclusive Solutions. Journal of the Knowledge Economy, 13(2): 926–955. DOI:10.1007/s13132-021-00763-4
[7] Chen, Y., Wang, Y., Nevo, S., Benitez-Amado, J., & Kou, G. (2015). IT capabilities and product innovation performance: The roles of corporate entrepreneurship and competitive intensity. Information and Management, 52(6): 643–657. DOI: 10.1016/j.im.2015.05.003
[8] Davidenko, P., Menshikova, E., & Gorbenkova, E. (2018). Smart settlements»: The development concept in a new socio-economic and informatiologic conditions. IOP Conference Series: Materials Science and Engineering, 365(2): 20–50. DOI: 10.1088/1757-899X/365/2/022050
[9] Del Giudice, M, & Straub, D. (2011). IT and entrepreneurism: An on-again, off-again love affair or a marriage? MIS Quarterly: Management Information Systems, 35(4): 9–61. DOI: 10.2307/41409961
[10] Del Giudice, Manlio, Carayannis, E. G., & Della Peruta, M. R. (2012). Cross-Cultural Knowledge Management (Vol. 11). Springer New York. DOI: 10.1007/978-1-4614-2089-7
[11] Ella, S., & Andari, R. N. (2018). Developing a Smart Village Model for Village Development in Indonesia. International Conference on ICT for Smart Society (ICISS), 1–6. DOI: 10.1109/ICTSS.2018.8549973
[12] Faridha, N. (2022). Local wisdom: Sustainable Tourism Development. International Social Sciences and Humanities, 1(2): 272–277. DOI: 10.32528/issh.v1i2.185
[13] Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1): 2–24. DOI: 10.1108/EBR-11-2018-0203
[14] Hartanto, B., Sari, S. R., Haryanti, A., & Jayawinangun, R. (2021). ELIS Behaviour for Students Using Internet and Social Networking Sites. 3rd International Symposium on Material and Electrical Engineering Conference (ISMEE, 110–114. DOI: 10.1109/ISMEE54273.2021.9774076
[15] Herlinawati, E., & Machmud, A. (2020). The Effect of Innovation on Increasing Business Performance of Smes in Indonesia. WSEAS Transactions on Business and Economics, 17(1): 51–57. DOI:10.37394/23207.2020.17.7
[16] Indrawan, M. I. (2018). Local Wisdom as the Foundation of Indonesian Economy in Facing the ASEAN Economic Community. International Conference of ASEAN Prespective and Policy (ICAP, 1(1), 17–20.
[17] Iskandar, A. H. (2020). Village SDGs Accelerate Achievement of Sustainable National Development Goals. Yayasan Pustaka Obor Indonesia.
[18] Jayawinangun, R., et al. (2024). Investigating the communication network for batik village tourism stakeholders to support smart green economy in Bogor regency, Indonesia. International Journal of Data and Network Science, 8(1): 381–392. DOI: 10.5267/j.ijdns.2023.9.016
[19] Juliana Jaya, P. E., Utama, M. S., Yasa, I. G. W. M., & Yuliarmi, N. N. (2020). Determinants of Creative Product Performance, Competitiveness, and Well-Being of Small and Medium Enterprises in Denpasar. International Journal of Innovation, Creativity and Change, 13(12): 621–635.
[20] Julien, P.-A. (2007). A theory of local entrepreneurship in the knowledge economy. Edward Elgar Pub. DOI:10.4337/9781847208750
[21] Kurniawati, S., & Chairunisa, P. (2023). Investigating the Technological Input in Culinary Micro, Small, and Medium Enterprises (MSMEs) in Relation to the COVID-19 Pandemic. Frontiers in Business and Economics, 2(1): 61–68. DOI: 10.56225/finbe.v2i1.146
[22] Lama, P. B., Subedi, R., Lamichhane, B. D., & Rimal, S. (2024). The influence of entrepreneurial orientation on business performance of SMEs: Evidence from Kathmandu, Nepal. International Journal of Business, Economics and Management, 11(2): 43–56. DOI: 10.18488/62.v11i2.3891
[23] Maja, P. W., Meyer, J., & Solms, S. (2020). Development of Smart Rural Village Indicators in Line With Industry 4.0. IEEE Access, 8(1): 17–33. DOI: 10.1109/ACCESS.2020.3017441
[24] Mardhatillah, U., Effendi, R., & Jamal, A. (2024). Investigating the Effect of E-Commerce, Capital and Labour on the Income of Micro, Small, and Medium Enterprises in Banda Aceh City, Indonesia. International Journal of Advances in Social Sciences and Humanities, 3(1): 18–26. DOI: 10.56225/ijassh.v3i1.270
[25] Mardianti, N. I., Warsono, H., Saputra, J., & Herwati, A. R. (2022). Impact of the COVID-19 Pandemic on Sustainable Development in Southeast Asia. Journal of Madani Society, 1(2). DOI: 10.56225/jmsc.v1i2.133
[26] Meirelles, F. S. (2020). Overview of ICT Use Indicators in Enterprises.
[27] Muchson, M., Kusumaningtyas, D., & Agung Pratama, B. (2023). Identification of Local Wisdom-Based Creative Economy in the City of Kediri. International Journal of Research and Review, 10(2): 799–805. DOI:10.52403/ijrr.20230295
[28] Mukti, I. Y., Iacob, M. E., Aldea, A., Govindaraju, R., & Hillegersberg, J. (2022). Defining Rural Smartness and Its Impact: A Systematic Literature Review. Journal of the Knowledge Economy, 13(2): 956–1007. DOI:10.1007/s13132-021-00736-7
[29] Mwanza, A. J. (2022). Can digital technology be used for addressing digital literacy in the dissemination of Indigenous Knowledge in rural areas? South African Journal of Libraries and Information Science, 88(1).
[30] Nugroho Himawan, E., Djuwaini, A., & Darmawan Putra, A. (2024). Adoption Of E-Commerce In Small And Medium-Sized Enterprises In Bogor District. International Journal of Science, Technology & Management, 5(1): 211–219. DOI: 10.46729/ijstm.v5i1.1050
[31] Onojaefe, D., & Leaning, M. (2007). The Importance of Partnerships: The Relationship between Small Businesses, ICT and Local Communities. Issues in Informing Science and Information Technology, 4(1): 725–737. DOI: 10.28945/983
[32] Paulussen, S., Geens, D., & Vandenbrande, K. (2011). Fostering a culture of collaboration: Organizational challenges of newsroom innovation. Making Online News, 2: 3–14.
[33] Prasanna, R., Jayasundara, J., Naradda Gamage, S. K., Ekanayake, E., Rajapakshe, P., & Abeyrathne, G. (2019). Sustainability of SMEs in the Competition: A Systemic Review on Technological Challenges and SME Performance. Journal of Open Innovation: Technology, Market, and Complexity, 5(4): 1–100. DOI:10.3390/joitmc5040100
[34] Prima Lita, R., Fitriana Faisal, R., & Meuthia, M. (2020). Enhancing small and medium enterprises performance through innovation in Indonesia: A framework for creative industries supporting tourism. Journal of Hospitality and Tourism Technology, 11(1): 155–176. DOI: 10.1108/JHTT-11-2017-0124
[35] Rudwiarti, L. A., Pudianti, A., Emanuel, A. W. R., Vitasurya, V. R., & Hadi, P. (2021). Smart tourism village, opportunity, and challenge in the disruptive era. IOP Conference Series: Earth and Environmental Science, 780(1): 12–18. DOI: 10.1088/1755-1315/780/1/012018
[36] Samara, E., Andronikidis, A., Komninos, N., Bakouros, Y., & Katsoras, E. (2023). The Role of Digital Technologies for Regional Development: A System Dynamics Analysis. Journal of the Knowledge Economy, 14(3): 2215–2237. DOI: 10.1007/s13132-022-00951-w
[37] Santoso, A., Fathin, C., Effendi, K., Novianto, A., Sumiar, H., Angendari, D. A. D., & Putri, B. (2019). Desa Cerdas. In Transformasi Kebijakan dan Pembangunan Desa Merespon Era Revolusi Industri.
[38] Sarstedt, M., Hair, J. F., Cheah, J. H., Becker, J. M., & Ringle, C. M. (2019). How to specify, estimate, and validate higher-order constructs in PLS-SEM. Australasian Marketing Journal, 27(3): 197–211. DOI:10.1016/j.ausmj.2019.05.003
[39] Sianipar, C. N. (2022). The Influence of Entrepreneurship Orientation, Business Environment and Management Ability on Business Performance of MSMEs Cafe in Tebing Tinggi City, Indonesia. Frontiers in Business and Economics, 1(3): 108–114.
[40] Singh, S., Sindhav, B., Eesley, D., & Bhowmick, B. (2018). Investigating the role of ICT intervention in grassroots innovation using structural equation modelling approach. Sādhanā, 43(7): 104. DOI: 10.1007/s12046-018-0909-8
[41] Stevy, R., Puspa, I., Widjaja, D., & Ongsa, R. (2023). Analysis of Internal Factors for Improving the Performance of Startup Companies in Medan, Indonesia. Journal of Madani Society, 2(1): 67–74. DOI:10.56225/jmsc.v2i1.179
[42] Sukawati, T. G. R. (2017). Establishing Local Wisdom Values to Develop Sustainable Competitiveness Excellence. GATR Journal of Management and Marketing Review, 2(3): 73–82. DOI:10.35609/jmmr.2017.2.3(11)
[43] Suriani, S., et al. (2024). Fostering Sustainable Development: Empowering Communities through Education, Zakat Innovation, and Social Assistance Strategies. Journal of Madani Society, 3(2): 52–57. DOI:10.56225/jmsc.v3i2.324
[44] Syamruddin, S., & Yunita, I. (2024). An Investigation of the Business Development of Pure Sari Tofu Factory, South Jakarta, Indonesia: Evidence from SWOT Anal-ysis. Frontiers in Business and Economics, 3(1): 1–13. DOI: 10.56225/finbe.v3i1.298
[45] Tosida, E., Herdiyeni, Y., Marimin, M., & Suprehatin, S. (2022). Investigating the effect of technology-based village development towards smart green economy: An application of variance-based structural equation modeling. International Journal of Data and Network Science, 6(3). DOI: 10.5267/j.ijdns.2022.3.002
[46] Utomo, M. N., Kaujan, K., & Mubarak, A. (2023). Innovation to Improve the Village Economy Through the Development of Local Wisdom-Based Agro-Tourism, in North Kalimantan, Indonesia. Agris Online Papers in Economics and Informatics, 15(2): 115–131. DOI: 10.7160/aol.2023.150210
[47] Vitasurya, V. R. (2016). Local Wisdom for Sustainable Development of Rural Tourism, Case on Kalibiru and Lopati Village, Province of Daerah Istimewa Yogyakarta. Procedia - Social and Behavioral Sciences, 216(1): 97–108. DOI: 10.1016/j.sbspro.2015.12.014
[48] Wahyuddin, W., Marzuki, M., Khaddafi, M., Ilham, R. N., & Sinta, I. (2022). A Study of Micro, Small and Medium Enterprises (MSMEs) during Covid-19 Pandemic: An Evidence using Economic Value-Added Method. Journal of Madani Society, 1(1): 1–7. DOI: 10.56225/jmsc.v1i1.123
[49] Widyanti, T., Tetep, T., Supriatna, A., & Nurgania, S. (2022). Development of a Local Wisdom-Based Creative Economy. 6th Global Conference on Business, Management, and Entrepreneurship (GCBME 2021, 6–57. DOI: 10.2991/aebmr.k.220701.010
[50] Yang, Xiugang (2022). How Does Green Investment Influence on Tourism Development in Thailand?. Journal of Environmental Management and Tourism, 13(4). DOI:10.14505/jemt.v13.4(60).11.
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Published
2025-09-30
How to Cite
ANDRIA, Fredi et al.
Drivers of the Smart Green Economy in Rural Settings: An Empirical Study on Local Wisdom, ICT, and the Mediating Role of Entrepreneurship.
Theoretical and Practical Research in Economic Fields, [S.l.], v. 16, n. 3, p. 656-667, sep. 2025.
ISSN 2068-7710.
Available at: <https://journals.aserspublishing.eu/tpref/article/view/9109>. Date accessed: 28 oct. 2025.
doi: https://doi.org/10.14505/tpref.v16.3(35).10.
Section
Articles
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