Sustainable Growth in MSMEs: Leveraging Human Capital for Enhanced Business Performance

Abstract

Purpose: Human capital is increasingly recognized as a critical determinant of business performance, particularly within micro, small, and medium enterprises (MSMEs). This paper examines the impact of human capital on MSMEs' operational efficiency, innovation, and competitive advantage, focusing on developments. Methodology: This study synthesizes findings from peer-reviewed articles, case studies, and industry reports to explore the role of human capital in MSME performance. The research emphasizes key factors such as employee skills, training programs, and leadership quality. It also analyses the interplay between human capital and technological adoption within MSMEs. Findings: The research reveals that MSMEs investing in skill development, leadership training, and a culture of continuous learning experience enhanced productivity and innovation. Despite these benefits, challenges like resource limitations, employee turnover, and inadequate access to training programs hinder human capital optimization. Emerging trends include the integration of digital learning tools and data analytics to enhance workforce efficiency. Implications: MSMEs should adopt structured human capital development programs, including continuous training, upskilling initiatives, and talent retention strategies. Policymakers can support these efforts through financial incentives and training subsidies tailored to MSMEs. Addressing these areas is crucial for fostering sustainable growth and innovation. Originality: This paper provides a comprehensive exploration of the interplay between human capital and business performance in MSMEs, contributing novel insights into strategies that can drive sustained growth and competitiveness in this sector.