The Role of Working Capital and Product Innovation in Productivity

Micro, small and medium enterprises (MSMEs) are businesses that are able to survive in the midst of a crisis, both in developed countries and in developing countries. To maximize the role of MSMEs in maintaining economic stability requires attention and assistance in its development since it is inseparable from the mandate of the law for the welfare of Indonesian people. The craftsmen still used traditional tools in the making process and had relatively very low capital and poor productivity and their innovations that could not yet be touched with modern tools. Data collection technique carried out was literature study and field research. Data from field was collected through the process of observation, interview, and documentation. The result obtained from this study showed that 20% of respondents had working capital of Rp 50,000,000.00, 60% of them had Rp 30,000,000.00 to Rp 40,000,000.00, while the rest, which was 20%, had under Rp 30,000,000.00. The use of very low working capital and poor technology innovation generated very low productivity, which was only 2% of working capital per month and from year to year, the number of craftsmen tended to decrease due to the difficulty of marketing the handicrafts.