Redefining IT governance for MSMEs: A simplified and adaptive framework for digital growth

Abstract

Micro, Small, and Medium Enterprises (MSMEs) increasingly rely on information technology to support operational efficiency and innovation in the Industry 4.0 environment. However, existing IT governance frameworks have largely been developed for large organizations and often exceed the structural capacity and resource availability of MSMEs. This study examines how IT governance mechanisms contribute to IT value and business value in MSMEs by proposing and empirically validating a simplified IT governance framework tailored to resource-constrained organizational contexts. Using a quantitative approach, data were collected from 289 MSME owners and managers in Indonesia and analyzed using Structural Equation Modeling (SEM). The proposed framework conceptualizes IT governance as a set of interrelated components encompassing leadership engagement, workplace management, and operational governance practices. The results indicate that leadership engagement and workplace management play a central role in enabling IT value creation, which in turn exerts a significant in3uence on business value. These findings suggest that IT governance e4ectiveness in MSMEs is shaped less by formalized structures and more by contextual and behavioral factors embedded in daily organizational practices. This study contributes to IT governance and information systems research by extending governance theory beyond large-enterprise assumptions and providing empirical evidence from an emerging economy context. From a practical perspective, the findings offer guidance for MSME owners and policymakers by demonstrating that incremental and value-oriented governance practices can support sustainable digital transformation without requiring comprehensive adoption of complex governance frameworks.