Information Technology Applications, Operational Efficiency and MSMEs Growth: An Empirical Study of Kalyana Karnataka

Abstract

Purpose: This study examines the influence of Information Technology (IT) Applications on Operational Efficiency and MSME Growth, with particular emphasis on the mediating role of Operational Efficiency among MSMEs in Kalyana Karnataka.

Design/Methodology: The study adopted a quantitative, cross-sectional research design based on data collected from 460 MSME respondents. IT Applications were assessed through six dimensions: Financial and Accounting Applications, Digital Payment Applications, Marketing and Customer Communication, E-Commerce Applications, Inventory and Operational Applications, and Business Information and Decision Support. The data were analysed using descriptive statistics, Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA), reliability and validity assessment, correlation analysis, and Structural Equation Modelling (SEM). The measurement model demonstrated strong reliability and validity, with Cronbach’s alpha ranging from 0.874 to 0.941, Composite Reliability from 0.909 to 0.950, and AVE from 0.629 to 0.718.

Findings: The results indicate that IT Applications have a significant positive effect on Operational Efficiency (β = 0.684, t = 16.68, p < 0.001) and MSME Growth (β = 0.287, t = 5.52, p < 0.001). Operational Efficiency also significantly influences MSME Growth (β = 0.593, t = 12.62, p < 0.001). The indirect effect of IT Applications on MSME Growth through Operational Efficiency is significant (β = 0.406, 95% CI [0.333, 0.485]), confirming partial mediation. The model explains 46.8% of the variance in Operational Efficiency (R² = 0.468) and 62.1% of the variance in MSME Growth (R² = 0.621). Model-fit results indicate good fit (CMIN/DF = 2.384, CFI = 0.957, TLI = 0.951, RMSEA = 0.046, SRMR = 0.041). Multi-group analysis further shows a significant enterprise-size difference in the IT Applications → Operational Efficiency relationship (p = 0.032).

Conclusion: The findings establish that IT Applications are an important driver of operational efficiency and MSME growth, with operational efficiency serving as a significant mechanism through which technology contributes to enterprise growth. The findings highlight the need for MSMEs to strengthen digital capabilities, particularly in e-commerce, marketing and customer communication, and business information systems.