The Mediating Role of Business Information Systems in the Relationship Between Innovation Management, Knowledge Management, and Product Development in MSMEs

Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in Indonesia’s economy; however, they face challenges in improving product development due to limited innovation practices, knowledge management, and technological utilization. This study aims to examine the mediating role of Business Information Systems (BIS) in the relationship between Innovation Management, Knowledge Management, and Product Development in MSMEs. A quantitative approach was employed using a survey of 100 MSME owners and managers in Central Jakarta. Data were analyzed using Structural Equation Modeling–Partial Least Squares (SEM-PLS). The results indicate that Knowledge Management has a significant positive effect on Product Development, while Innovation Management and Business Information Systems do not have a significant direct effect. Furthermore, Innovation Management significantly influences Business Information Systems, but Knowledge Management does not. The mediation analysis shows that Business Information Systems do not mediate the relationship between Innovation Management and Product Development nor between Knowledge Management and Product Development. These findings suggest that MSME product development is primarily driven by effective knowledge management rather than innovation practices or information system adoption alone. The study highlights the importance of strengthening knowledge management practices to enhance product competitiveness in MSMEs.