A Comprehensive Micro, Small, and Medium Enterprise Empowerment Model for Developing Sustainable Tourism Villages in Rural Communities: A Perspective

Abstract

This study investigates the factors driving micro, small, and medium enterprise (MSME) empowerment, tourism development, and sustainable tourism villages, focusing on Ponggok Tourism Village as a case study. The purpose is to address gaps in understanding how leadership, innovation, governance, collaboration, capacity building, and technology contribute to empowering MSMEs and achieving sustainability in rural tourism contexts. Using a mixed-methods approach, the study combines quantitative analysis of survey data and thematic analysis of interviews with MSME actors, facilitators, and local government officials. Key findings reveal that leadership and innovation are critical drivers of MSME empowerment, with technology in service quality significantly impacting tourism development. However, technology in governance and transparency shows limited direct influence on tourism, emphasizing the need for better alignment with tourism strategies. Additionally, MSME empowerment strongly influences both tourism development and the sustainability of tourism villages, creating a mutually reinforcing relationship. This study provides a novel framework for integrating leadership, technological advancements, and governance improvements with local tourism strategies. By highlighting Ponggok’s village potential as a model, the findings offer practical insights for policymakers and practitioners seeking to enhance rural tourism through MSME empowerment. Future research could explore scaling this framework to other contexts and refining technological tools for governance in tourism.

1. Introduction

The empowerment of micro, small, and medium enterprises (MSMEs) in rural tourism villages is critical to boosting local economies and ensuring sustainable development. Tourism has been identified as a significant driver of economic growth, offering employment opportunities and elevating income levels in rural areas [1]. Integrating MSMEs into the tourism sector transforms them into unique attractions, showcasing local crafts and cuisine while enriching the visitor experience [2]. This approach aligns with community-based tourism principles, emphasizing active local involvement to harness untapped potential and sustain regional development. The research underscores the necessity of innovative models and government support to empower MSMEs, facilitating their contribution to the appeal and competitiveness of rural tourism villages [2,3].

The performance of MSMEs serves as a vital link between essential input factors such as leadership [4,5], innovation [6,7], collaboration [8,9], good governance [10,11], and capacity building [12,13] to achieve desirable outcomes in tourism development and sustainability. Leadership, encompassing visionary leadership, effective decision-making, inspiring teams, and adaptive approaches, is essential for providing strategic vision and fostering innovation, enabling MSMEs to develop competitive products and services [14,15,16,17,18,19]. Innovation, as a driving force, empowers MSMEs to adapt to technological advancements, explore creative approaches to addressing challenges, enhance market relevance and sustainability through the development of new products or services, the introduction of innovative operational methods, and the exploration of new markets or customer segments [20,21,22].

Collaboration among stakeholders—government, private sector, and communities—through active engagement, resource sharing, and strategic partnerships strengthens the support systems needed to foster MSME growth while ensuring accountability and trust through good governance [8,23,24,25]. Effective governance creates a transparent and fair business environment by ensuring accountability, policy clarity, and fairness that support MSME growth and align with sustainable tourism goals [26,27,28,29]. Capacity-building initiatives, including managerial training, technical skills development, and knowledge sharing, significantly enhance the operations and capabilities of MSMEs [30]. Studies by [31,32] highlight the importance of capacity building in equipping MSMEs with the skills needed to adapt to changing market demands. However, despite their importance, these factors’ pathways influence MSME empowerment, and their subsequent impact on tourism development remains underexplored.

In addition to leadership and governance, technology integration plays a crucial role in enabling MSMEs to enhance operational efficiency, improve service quality, and expand market reach [33,34,35]. Technology integration is critical in helping MSMEs improve operational efficiency, enhance service quality, and expand market reach. Technology is also vital for improving governance, transparency, and service delivery in tourism development, particularly in rural settings [36,37]. However, MSMEs in rural areas face significant barriers to technology adoption due to limited infrastructure and low digital literacy [38]. Technology integration is critical in helping MSMEs improve operational efficiency, enhance service quality, and expand market reach [33,34,35]. Technology is also vital for improving governance, transparency, and service delivery in tourism development, particularly in rural tourism settings [36,37]. Despite these insights, there remains a need for a comprehensive model that integrates strategies of leadership, innovation, collaboration, governance, capacity building and technology to empower MSMEs effectively.

MSMEs have a transformational influence, contributing significantly to economic growth, community engagement, cultural preservation, and infrastructural enhancement in rural tourism [39,40,41]. Technology plays a central role in supporting MSMEs’ economic impact by providing access to broader markets through digital platforms, enabling more efficient transactions, and effectively promoting local products and services [21,22,33,35,38]. In terms of community participation, technology encourages community engagement by offering better communication tools, collaborative platforms, and broader access to information, enhancing the active role of communities in tourism initiatives [42,43]. Additionally, technology strengthens cultural preservation by digitizing local traditions, documenting cultural heritage, and promoting crafts and culinary specialties through digital media, thus reaching global audiences while preserving the unique identity of rural communities [44].

Infrastructure development, a critical factor in rural tourism, can also be enhanced through technology. Technology-based systems for managing transportation, utilities, and communication networks enable greater efficiency, benefiting both tourists and local communities [45,46]. However, limitations in technological infrastructure and low digital literacy remain significant barriers for MSMEs in many rural areas [47,48]. Therefore, a comprehensive strategic approach is needed to ensure that technology serves not only as a supporting tool but also as a key driver that integrates economic, social, and cultural aspects into rural tourism development. Effective technology integration, leadership, innovation, collaboration, governance, and capacity building can empower MSMEs to deliver long-term, sustainable impacts in rural tourism development.

This study addresses these gaps by proposing a comprehensive framework for MSME empowerment that links input factors (leadership, innovation, collaboration, governance, capacity building and technology) to tourism development outcomes and the achievement of sustainable tourism villages focusing on Ponggok as a case study. Specifically, the research formulates and tests the following hypotheses: (1) Leadership, innovation, collaboration, governance, and capacity building positively influence MSME empowerment. (2) Technology in governance, transparency, and service quality positively impacts tourism development. (3) MSME empowerment positively influences both tourism development and sustainable tourism village outcomes. (4) Tourism development positively impacts sustainable tourism villages.

The structure of this paper is organized as follows: Section 2 provides a comprehensive theoretical framework, synthesizing existing research on MSME empowerment, tourism development, and sustainable tourism. Section 3 outlines the research methodology, detailing data collection and analysis techniques. Section 4 presents the findings of the Ponggok case study, linking input factors, MSME empowerment, tourism development and sustainable tourism village outcomes. Section 5 discusses the implications of these findings for MSME sustainability and rural tourism development. Finally, Section 6 concludes the paper by summarizing the study’s contributions and providing recommendations for future research and policy.

2. Theoretical Framework

This study investigated the relationship between MSMEs empowerment, tourism-development-induced social change and sustainable tourism villages using the sustainability framework. A sustainability framework, as shown in Figure 1, which depicts the economy embedded within the social system, which is itself embedded in the environment system, highlights the nested and interconnected nature of these systems [49,50,51]. A sustainability framework based on economic, social, and environmental dimensions emphasizes the interconnectedness and balance necessary for achieving sustainable development [52]. Economically, sustainability involves ensuring stable and equitable economic growth while promoting resource efficiency and innovation to address environmental challenges [53]. Socially, it encompasses fostering social cohesion, cultural preservation, and equitable empowerment, which includes addressing disparities and enabling local communities to participate actively in decision-making processes [54]. Environmentally, it requires the responsible management of natural resources and biodiversity, emphasizing resilience and adaptability to mitigate environmental degradation and preserve ecological systems [55]. Together, these pillars form a comprehensive framework to guide actions toward sustainable and inclusive societal progress.

Figure 2 illustrates an integrated model for sustainable tourism development, emphasizing the interconnection of economic, social, and environmental dimensions. At its core, the model highlights the empowerment of MSMEs, which are pivotal in driving local economic growth and resilience [56]. Surrounding this is the social layer, underscoring tourism’s role in fostering community development, cultural preservation, and social inclusivity [57]. Encasing these is the environmental dimension, focusing on eco-friendly practices that protect ecosystems and ensure long-term sustainability [58]. The model outlines key pathways for achieving this integration, such as MSME empowerment, tourism-induced social change, and the promotion of sustainable tourism villages, offering a holistic approach to balanced and inclusive development.

2.1. MSME Empowerment

Figure 3 illustrates the relationship between the Resource-Based View (RBV) in entrepreneurship and MSME empowerment [59]. The RBV framework highlights key resources like human capital, organizational capital, financial capital, physical capital, and relationship capital that contribute to entrepreneurial success [60]. These resources interact dynamically to empower MSMEs in areas such as leadership, innovation, collaboration, good governance, and capacity building [61]. The connections represent how different types of capital support the development of specific empowerment dimensions, emphasizing that the strategic use of these resources can drive MSMEs toward sustainable growth and competitive advantage [62].

Leadership plays a pivotal role in empowering micro, small, and medium enterprises (MSMEs), serving as a cornerstone that links foundational factors to successful outcomes in tourism development and sustainability. Effective leadership provides MSMEs with the tools, vision, and strategies necessary to navigate dynamic market environments, overcome challenges, and achieve long-term competitiveness [63]. Visionary leadership, decision-making, inspiring leadership, and adaptive leadership are critical dimensions that significantly impact the empowerment of MSMEs, particularly in the tourism sector [14,15,16,17,18,19]. Visionary leadership enables leaders to articulate a compelling vision that aligns organizational resources with strategic objectives, fostering trust and collaboration among stakeholders [16,17,64]. Decision-making supports MSME adaptability and responsiveness by providing clarity and direction in critical business situations, ensuring alignment with immediate operational needs and long-term goals [15]. Inspiring leadership fosters a positive organizational culture that motivates teams, enhances employee satisfaction, and sustains high performance through transparent communication and trust-building [65,66]. Adaptive leadership equips MSMEs with the resilience and flexibility necessary to navigate dynamic challenges, maintain organizational stability, and drive innovation [67,68]. These leadership qualities not only enhance MSME capabilities but also align their efforts with broader tourism development goals, supporting the hypothesis that leadership significantly impacts MSME empowerment.

H1: 

Leadership has a significant positive impact on MSME empowerment.

Innovation is a critical factor in empowering MSMEs (micro, small, and medium enterprises) to remain competitive and sustainable in the evolving tourism sector [69,70]. Through product, process, and market innovation, MSMEs can adapt to changing consumer demands and market challenges. Product innovation, which involves the development of new products or services, allows MSMEs to create unique offerings such as eco-tourism packages and personalized travel experiences [71,72]. The research in [69] demonstrated that such innovations significantly enhance the competitiveness of tourism MSMEs in Madeira, Portugal, while [73] highlighted the success of health tourism SMEs in Malaysia that tailored services to meet customer needs. Process innovation, on the other hand, focuses on the introduction of operational improvements to enhance efficiency and resilience. Studies by [74,75] revealed that digital transformation and the adoption of green technologies helped MSMEs streamline operations and maintain competitiveness during crises. Furthermore, [76] emphasized that process innovation fosters organizational learning, enabling MSMEs to proactively address operational inefficiencies and continuously adapt to market changes.

Market innovation, which involves exploring new markets or customer segments, is equally essential for MSME growth and sustainability. The authors of [71] found that SMEs with strong innovation capabilities are better equipped to explore new markets and customer segments, thereby improving their sustainability and gaining a competitive advantage. Similarly, [77] emphasized the importance of marketing competency and innovation in achieving a sustainable competitive edge. This study concluded that marketing innovation, which includes identifying and targeting new customer bases, significantly enhances the ability of SMEs to remain competitive and adaptable in an ever-evolving market landscape. These findings highlight the strategic importance of market innovation as a driver for the long-term resilience and success of MSMEs. This comprehensive role of innovation supports the hypothesis:

H2: 

Innovation has a significant positive impact on MSME empowerment.

Collaboration among stakeholders—including government bodies, private enterprises, and local communities—is pivotal in empowering micro, small, and medium enterprises (MSMEs) by enhancing stakeholder engagement, facilitating resource sharing, and fostering strategic partnerships. Effective stakeholder engagement involves the active participation of diverse actors in decision-making processes, fostering trust and mutual understanding. This inclusive approach enables MSMEs to address complex challenges and align their objectives with broader community and industry goals. For instance, the United Nations Department of Economic and Social Affairs [78] emphasizes that sustainable development decision-making requires broad stakeholder engagement to ensure inclusive and effective outcomes.

Resource sharing, which entails the collaborative utilization of financial, human, and physical assets, is essential for MSMEs to overcome limitations such as restricted access to capital and infrastructure. By pooling resources, MSMEs can enhance their operational capacities and innovate more effectively. Strategic partnerships with government entities and private sector organizations further bolster MSME empowerment by providing access to new markets, technologies, and expertise. The paper [25] discusses how multi-stakeholder partnerships can contribute to transformative change by leveraging the strengths and resources of various stakeholders to achieve outcomes that individual efforts cannot reach. Similarly, [79] discusses how stakeholder engagement practices facilitate the implementation of circular economy principles in manufacturing organizations, highlighting the importance of collaboration in achieving sustainability goals. These collaborative efforts enable MSMEs to integrate diverse expertise and resources, resulting in co-created products and services that resonate with both local communities and broader markets. This comprehensive role of collaboration supports the hypothesis:

H3: 

Collaboration has a significant positive impact on MSME empowerment.

Good governance plays a critical role in empowering MSMEs (micro, small, and medium enterprises) by creating a transparent, equitable, and supportive business environment. Accountability, as an essential component of good governance, ensures transparency in decision-making and resource allocation. The authors in [26] emphasize that transparency fosters trust and confidence among MSMEs, encouraging participation and collaboration in community-driven initiatives. Similarly, [27] argue that governance practices that are accountable to stakeholders, improve resource efficiency, and enable MSMEs to align their activities with sustainable tourism goals. By promoting an environment where decisions are transparent and resource allocation is justifiable, accountability contributes significantly to MSME empowerment.

Policy clarity and fairness are also pivotal for enabling MSMEs to thrive. Clear and consistent regulations reduce uncertainties and operational challenges faced by MSMEs, providing them with a stable framework for growth. The authors in [40] found that policy clarity enhances MSME adaptability by ensuring businesses can effectively navigate legal and regulatory environments. Fairness, which ensures equitable treatment of all stakeholders, further strengthens governance by creating an inclusive system where MSMEs of varying sizes and sectors can access resources and opportunities without discrimination. The authors in [28] highlight that equitable governance fosters cooperation and reduces conflicts, enabling MSMEs to contribute meaningfully to sustainable tourism development. Collectively, these components of good governance support the hypothesis:

H4: 

Good governance has a significant positive impact on MSME empowerment.

Capacity building plays a critical role in empowering micro, small, and medium enterprises (MSMEs) by enhancing their operational capabilities and resilience in dynamic business environments. The authors in [80] discuss how capacity building can transform political participation, which can be adapted to the context of MSME empowerment. Managerial training, as an integral aspect of capacity building, equips MSME owners and managers with essential skills for effective business management, including strategic planning, financial management, and resource allocation [30]. Similarly, technical training focuses on developing operational and technological efficiency, enabling MSMEs to adopt innovative processes and improve productivity [31]. Knowledge sharing, through platforms that facilitate the exchange of best practices and industry expertise, further amplifies MSMEs’ ability to navigate market challenges and capitalize on growth opportunities [32]. These components collectively build a robust foundation for sustained business success. Empirical evidence underscores the significant positive impact of capacity-building programs on MSME empowerment. The authors in [81] assert that structured training and knowledge-sharing initiatives directly enhance the decision-making capabilities and competitiveness of MSMEs. The authors in [31] found that technical training initiatives improve operational efficiency, while [32] emphasized the transformative role of collaborative knowledge sharing in fostering innovation and adaptability among MSMEs. These findings strongly support the hypothesis:

H5: 

Capacity building has a significant positive impact on MSME empowerment.

2.2. Tourism Development

Figure 4 illustrates the connection between the transition in development theory and tourism development through two primary dimensions: socio-technical and socio-ecological [82]. The socio-technical dimension focuses on leveraging technology to enhance governance, ensure transparency, and improve service quality in tourism [83]. This reflects the integration of technological advancements into governance structures and operational processes to build efficiency and trust. The technocentric perspective continues to prevail over socio-ecological frameworks, and socio-technical transition theory does not sufficiently diverge from technocentric and growth-oriented paradigms of progress and development [51]. These dimensions highlight the role of technology in facilitating a sustainable and efficient transition in tourism development practices.

The integration of technology in governance has become a critical focus in enhancing administrative efficiency and strengthening the capacity of micro, small, and medium enterprises (MSMEs) in tourism development. The authors in [84] highlight that the digital revolution, through the adoption of technologies such as the Internet of Things (IoT) and Artificial Intelligence (AI), has transformed the tourism industry by improving customer service and operational efficiency. These findings underscore the importance of e-governance frameworks in simplifying bureaucratic processes and improving MSMEs’ access to essential resources. Digital platforms enable MSMEs to easily obtain information and government services that support their operational sustainability.

Furthermore, the role of data-driven decision-making in tourism governance has been widely discussed in the literature. The authors in [85] argue that smart tourism destinations leveraging data and information technology can enhance destination competitiveness through innovation and collaboration among stakeholders. Additionally, technology integration in governance, such as through the Penta-Helix model involving governments, businesses, academia, communities, and media, has been identified as a key factor in developing tourism infrastructure and digitizing financial management. This integration supports MSMEs in adapting to modern market demands, creating more resilient economic ecosystems, and promoting sustainable tourism practices. This comprehensive role of technology in governance strongly supports the hypothesis:

H6: 

Technology in governance has a significant positive impact on tourism development.

The integration of technology in enhancing transparency plays a crucial role in the development of tourism driven by micro, small, and medium enterprises (MSMEs). One of the key aspects is transparent financial reporting, where MSMEs can utilize digital tools such as cloud-based accounting and online financial platforms to share accurate and timely financial data with stakeholders. Research by [84] highlights that transparent financial systems build trust among investors, customers, and regulators, ultimately increasing financial support and growth opportunities for MSMEs in the tourism sector. This increased accountability not only enhances the reputation of MSMEs individually but also strengthens trust within the broader tourism ecosystem.

Furthermore, supply chain visibility and customer feedback accessibility have been identified as essential components in leveraging technology for transparency. Digital supply chain management tools enable MSMEs to share real-time information about product sourcing, inventory, and logistics, providing stakeholders with insights into sustainable and ethical practices [86]. Similarly, customer feedback platforms, such as online review systems and social media, allow MSMEs to engage directly with customers, address complaints transparently, and improve service quality [87]. This comprehensive role of technology in enhancing transparency strongly supports the hypothesis:

H7: 

Technology in transparency has a significant positive impact on tourism development.

Technology plays a pivotal role in improving operational efficiency for MSMEs in the tourism sector, enabling them to streamline their service processes and reduce costs. According to [84], digital tools such as automated booking systems, inventory management software, and cloud-based operations platforms help MSMEs manage resources more effectively, minimizing manual intervention and errors. This increased efficiency not only reduces operational costs but also enhances the speed and reliability of service delivery. By adopting these technologies, MSMEs in tourism can focus more on innovation and customer satisfaction, which significantly contributes to their competitiveness and the broader development of the tourism industry.

Additionally, digital accessibility and customized service delivery are critical components in leveraging technology to improve service quality. As highlighted by [85], user-friendly digital platforms, such as mobile apps and responsive websites, make it easier for customers to access MSME services anytime and anywhere. These platforms also enable MSMEs to gather customer data and insights, facilitating personalized services tailored to individual preferences and needs. Studies by [88] indicate that personalization not only improves customer satisfaction but also fosters customer loyalty, ultimately driving the growth of MSMEs in tourism. This holistic improvement in service quality highlights the transformative impact of technology on tourism and supports the hypothesis:

H8: 

Technology in service quality has a significant positive impact on tourism development.

2.3. Relationship Between MSME Empowerment, Tourism Development and Sustainability Tourism Village

Figure 5 represents a conceptual framework connecting three key dimensions of sustainable tourism development: economic, social, and environmental. The economic aspect emphasizes the empowerment of MSMEs as a critical factor in fostering local economic growth [89]. The social dimension focuses on tourism development, which involves engaging communities and creating opportunities for social well-being [90]. Meanwhile, the environmental dimension highlights the creation of sustainable tourism villages, emphasizing the importance of preserving natural resources and ensuring ecological balance [91]. The arrows connecting these dimensions signify the interdependence of economic empowerment, social engagement, and environmental sustainability in achieving holistic and sustainable tourism development.

MSMEs play a pivotal role in enhancing tourism development through operational efficiency, resource utilization, and stakeholder engagement. Operational efficiency ensures that MSMEs streamline their business processes, reducing costs and improving service delivery. Efficient operations allow MSMEs to respond quickly to tourist demands, fostering satisfaction and repeat visits. Research by [92] highlights that operational efficiency directly contributes to the competitiveness of SMEs in tourism-related industries, enabling them to thrive in dynamic markets. Effective resource utilization is another key factor, as MSMEs must optimize their assets, such as workforce, infrastructure, and technology, to sustain their contributions to the tourism sector. The strategic allocation of resources allows MSMEs to innovate and adapt to changing market conditions, which is critical in the fast-evolving tourism industry. The authors in [93] found that the efficient use of digital resources by MSMEs significantly enhances their ability to attract and retain tourists, contributing to sustainable tourism development. Stakeholder engagement is equally crucial, as strong relationships with local communities, governments, and tourists build trust and foster collaboration. Engaging stakeholders can lead to increased access to funding, policy support, and market opportunities, enabling MSMEs to scale their impact. According to research by [94], collaboration with stakeholders significantly enhances MSME resilience and their capacity to contribute to the local tourism economy. This comprehensive impact of MSME empowerment strongly supports the hypothesis:

H9: 

MSME empowerment has a significant positive impact on tourism development.

The empowerment of micro, small, and medium enterprises (MSMEs) plays a crucial role in achieving sustainable tourism villages through key indicators such as operational efficiency, resource utilization, and stakeholder engagement. Operational efficiency can be achieved through digital transformation, enabling MSMEs to integrate sustainable practices into their operations, enhance resource efficiency, and reduce their ecological footprint [42]. Resource utilization, when effectively managed, ensures the optimal use of local assets and natural resources, aligning with environmental sustainability goals and preserving the ecological integrity of the village. Furthermore, stakeholder engagement, including collaboration with local communities, governments, and private sectors, fosters shared responsibility and inclusivity, which are essential for long-term success [95]. This engagement also strengthens MSMEs’ resilience in facing challenges, contributing significantly to the sustainability of tourism destinations [70]. This comprehensive role of MSME empowerment strongly supports the hypothesis:

H10: 

MSME empowerment has a significant positive impact on sustainable tourism villages.

The role of MSMEs in tourism development has been widely recognized as a catalyst for achieving sustainability in tourism villages. Tourism development is strongly associated with significant positive economic impacts, as it contributes to increased local income and job creation. The authors in [96] demonstrated that MSMEs in community-based tourism provide economic opportunities for local residents by integrating them into the tourism supply chain. This integration not only generates employment but also creates an inclusive economic environment that sustains local livelihoods. Similarly, [97] found that tourism enterprises led by MSMEs significantly enhance the economic resilience of rural communities, thereby contributing to the overall sustainability of tourism villages.

Tourism development provides not only economic benefits but also fosters community participation, a critical component of sustainable tourism. The authors in [98] emphasized that tourism empowerment and community involvement play a vital role in balancing community interests and promoting sustainable rural tourism development. This participatory approach ensures that tourism development aligns with local needs and priorities, thereby strengthening the sustainability of tourism villages. Additionally, MSMEs play a vital role in cultural preservation by promoting traditional crafts, culinary practices, and cultural performances. The authors in [99] highlighted that community-based tourism (CBT) serves as a means to achieve the Sustainable Development Goals (SDGs) articulated in the United Nations’ 2030 Agenda. By integrating cultural heritage into tourism offerings, MSMEs contribute to the protection and promotion of local identity, enhancing the authenticity and attractiveness of tourism villages. Finally, the contribution of MSMEs to infrastructure development supports sustainable tourism by improving access, facilities, and services essential for tourism growth. The authors in [99] also noted that CBT initiatives often contribute to local infrastructure improvements, aligning with the broader goals of sustainable tourism and community development. Collectively, these contributions underscore the multifaceted role of MSMEs in achieving sustainability in tourism villages by addressing economic, social, and cultural dimensions systematically. This comprehensive role of tourism development supports the hypothesis:

H11: 

Tourism development has a significant positive impact on sustainable tourism villages.

3. Materials and Methods

Although research on the role of MSMEs in tourism development has advanced, significant gaps remain, particularly in integrating key factors such as leadership, innovation, collaboration, good governance, and capacity building to achieve MSME empowerment. The existing literature tends to explore these dimensions in isolation, lacking a comprehensive understanding of their interconnections and collective impact on tourism development. To address this gap, a holistic approach is needed to integrate these dimensions into a unified theoretical framework to better understand their synergistic effects on sustainable tourism village development.

Another gap lies in the role of technology in governance, transparency, and service quality within tourism development. While previous studies have highlighted the potential of technology to enhance operational efficiency and stakeholder engagement, empirical evidence on how technological advancements specifically strengthen governance practices, increase transparency, and improve service quality in tourism villages is limited. A deeper understanding is required to uncover how technology can enhance the integration of governance with innovation and collaboration, enabling MSMEs to optimize their capabilities to support sustainable tourism village development. Furthermore, the extent to which technology simultaneously supports capacity building and fosters transparency to build trust among stakeholders remains unclear.

The multidimensional relationship between MSME empowerment, tourism development, and sustainable tourism villages also remains inadequately conceptualized. Current research falls short of exploring how leadership drives effective innovation and collaboration, while governance and capacity building provide the structural framework and skills needed to support sustainability. Moreover, the collective impact of integrating these dimensions on the development of sustainable tourism villages through the application of technology has not been sufficiently addressed. Research focusing on the interactions among these elements could provide deeper insights into optimizing tourism development and creating sustainable impacts for tourism villages. This more comprehensive understanding will provide a stronger theoretical foundation and support strategic decision-making for policymakers and industry stakeholders.

This study aims to address the identified gaps by proposing and empirically testing a comprehensive framework that integrates critical components, including leadership, innovation, collaboration, governance, capacity building, and the role of technology in governance, transparency, and service quality. By examining the interplay of these factors, the research seeks to provide a deeper understanding of how MSME empowerment contributes to tourism development and ultimately leads to the creation of sustainable tourism villages. This proposed framework (Figure 6) is designed to align the foundational elements of MSME empowerment with the enabling role of technology and strategic initiatives, offering both theoretical advancements and practical insights for policymakers, practitioners, and stakeholders to foster sustainable rural tourism through empowered MSMEs.

3.1. Research Design

This study employed a mixed-methods research design to comprehensively examine the relationships between foundational input variables (leadership, innovation, collaboration, governance, capacity building, and the role of technology), MSME empowerment, tourism development, and sustainable tourism villages. Quantitative methods were prioritized to test hypotheses and measure relationships between variables, followed by qualitative methods to provide deeper contextual insights. The case study was focused on Ponggok Village, a leading tourism village in Indonesia known for successfully integrating MSME development and sustainable tourism. A situational map of the village was used to locate survey respondents, ensure a representative distribution across the area, and support transparency in data collection.

Quantitative data were collected through structured surveys designed to measure dimensions of leadership, levels of innovation, collaboration efforts, governance quality, MSME empowerment, tourism development, and sustainability practices. Respondents were selected using a purposive sampling strategy from three primary groups: MSME actors, MSME facilitators, and local government officials. The survey included demographic data collection and Likert-scale questions to evaluate relationships between variables. The qualitative phase involved semi-structured interviews and focus group discussions (FGDs) conducted with the same respondents from the quantitative phase. This phase was designed to confirm the quantitative findings while exploring the respondents’ experiences, perspectives, and challenges in greater depth. Using the same respondents ensured data continuity and allowed for more comprehensive insights into the targeted topics.

The integration of quantitative and qualitative data was conducted using an explanatory sequential design. Quantitative findings were analyzed statistically to identify relationships between variables, which then served as the basis for further exploration during interviews and FGDs. Quantitative data provided an overview of the relationships, while qualitative data offered context and clarified the findings. This approach ensured a holistic and in-depth analysis of how foundational input variables influence MSME empowerment, tourism development, and the sustainability of tourism villages. The stages of the research can be seen in Figure 7 below.

3.2. Study Area and Population

This research was conducted in Ponggok Village, Polanharjo Subdistrict, Klaten Regency, Indonesia. Ponggok Village was chosen as the study site because it is recognized as one of the most successful rural tourism villages in developing community-based tourism. Its flagship attraction, Umbul Ponggok, an underwater tourism destination, has gained immense popularity and become a driving force for the local economy. The village is characterized by a unique integration of eco-tourism, cultural tourism, and community-based tourism, leveraging natural resources and local traditions to attract tourists. Furthermore, Ponggok Village has demonstrated success in managing the tourism sector by involving MSMEs as key drivers of the local economy. These MSMEs play vital roles in providing accommodation services, culinary experiences, transportation, and tourism activities that enhance the visitor experience. The collaborative management of tourism between the village government, MSMEs, and the local community makes Ponggok an ideal case study for understanding MSME empowerment and its role in supporting the development of sustainable tourism villages.

The target population of this research includes various stakeholders directly involved in tourism activities in Ponggok Village. The primary population consists of MSME actors, who serve as the main economic drivers supporting the tourism sector. These MSMEs operate in diverse fields, including eco-tourism, culinary services, accommodation and homestays, tourism equipment rentals, aquaculture, catering services, and event organization, among other tourism-related activities. Another group is the MSME facilitators, who play a vital role in enhancing the capacity of MSME actors. These facilitators provide training, guidance, and strategic advice to help MSMEs develop their businesses sustainably. Their role is essential in improving management skills, operational efficiency, and innovation capabilities, enabling MSMEs to remain competitive in the tourism sector. Additionally, the study involves local government officials, who bear the primary responsibility for planning, managing, and developing the tourism sector in Ponggok Village. The local government plays a key role in policy-making, strategic planning, and monitoring MSME empowerment initiatives to ensure sustainable tourism development. Overall, the combination of MSME actors, MSME facilitators, and local government officials creates a comprehensive foundation for understanding the dynamics of MSME empowerment and sustainable tourism development in Ponggok Village.

3.3. Data Collection

The study began with quantitative data collection through the distribution of structured surveys to MSME actors in Ponggok Tourism Village. A total of 110 questionnaires were distributed directly to ensure clarity and understanding of the survey content. All questionnaires were returned in complete and valid condition for analysis, resulting in a 100% response rate. The survey was designed to measure key variables such as leadership, innovation, collaboration, governance, capacity building, technology in governance, technology in service quality, technology in transparency, MSME empowerment, tourism development, and sustainability practices. The survey instrument utilized a Likert scale ranging from 1 (“strongly disagree”) to 5 (“strongly agree”). The survey questions were crafted in simple and clear language to minimize confusion and were adapted from previously validated and reliable literature. Detailed descriptions of the measurement instruments, including the specific questions and their sources, are provided in the Appendix A. Data collection was conducted over two weeks, providing respondents with sufficient time to complete the survey without pressure. The quantitative findings provided initial insights that served as the foundation for developing guidelines for the qualitative phase.

Following the quantitative findings, qualitative data collection was conducted to further explore the patterns and relationships identified earlier. Semi-structured interviews were conducted with the same respondents as in the survey phase, consisting of 100 MSME actors, 5 MSME facilitators, and 5 local government officials in Ponggok. This approach ensured data continuity and provided a deeper context for the survey results. Through these interviews, the study gained richer insights into the challenges, experiences, and strategies of the respondents. The data obtained from the interviews were transcribed verbatim and analyzed using thematic analysis to identify key themes and patterns relevant to the objectives of this research.

3.4. Data Analysis

The quantitative data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) [100] to test the hypothesized relationships among variables (H1–H11). This approach enabled the simultaneous examination of direct and indirect effects across a multivariate framework, including input variables such as leadership, innovation, collaboration, governance, and capacity building, technology in governance, technology in service quality, technology in transparency and outcomes like MSME empowerment, tourism development, and sustainable tourism villages.

The analysis of PLS-SEM in this study consists of two main stages: testing the measurement model (outer model) and the structural model (inner model). In the measurement model testing stage, reliability and validity of the constructs are examined to ensure the consistency and accuracy of indicators in measuring the latent constructs. Reliability is tested using Cronbach’s Alpha and outer loading with values ≥0.7 are considered acceptable. Convergent validity is assessed through the Average Variance Extracted (AVE), where AVE values ≥0.5 are deemed adequate. Subsequently, in the testing of the structural model (inner model), the relationships between latent variables are analyzed. Collinearity evaluation is conducted by calculating the Variance Inflation Factor (VIF), with values ≤5 indicating the absence of multicollinearity issues. The Coefficient of Determination (R²) is used to evaluate the ability of independent variables to explain dependent variables, with categories of R² ≥ 0.25 considered weak, ≥0.5 moderate, and ≥0.75 substantial. The significance of relationships between constructs is assessed using the bootstrapping method, producing p-values or t-statistics, where relationships are considered significant if p-value ≤ 0.05. The PLS-SEM findings provided empirical evidence of both direct and indirect effects, highlighting critical pathways for MSME-based tourism development, which will serve as a guide for interviews in the qualitative process.

Qualitative data were analyzed using thematic analysis to provide contextual depth to the quantitative findings [101]. Semi-structured interviews with 110 participants, including 100 MSME actors, 5 village government representatives, and 5 MSME mentoring bodies in Ponggok, were transcribed and coded systematically. The thematic analysis process of the interviews with MSME actors began with reading the transcripts to understand the data, followed by initial coding of significant segments. These codes were grouped into preliminary themes, which were then reviewed and refined to ensure relevance and consistency. The identified themes were given clear names and definitions and subsequently reported. This analysis reveals patterns in the relationship between MSME empowerment, tourism development, and sustainable tourism villages.

4. Results

The demographic profile of participants, representing MSMEs in Ponggok, reflects a diverse range of characteristics in terms of age, gender, business experience, and types of businesses managed. The majority of participants are over 54 years old (25.45%), followed by those aged 35–44 years (20.91%). Gender distribution is relatively balanced, with 48.18% male and 51.82% female participants. In terms of business experience, most MSMEs have been operating for 1–3 years (37.27%), with fewer having more than 6 years of experience (18.18%). The businesses managed by these participants are primarily culinary enterprises (28.18%), catering services (25.45%), and aquaculture ventures (17.27%). Other business types, such as accommodation and homestays (8.18%), tourism equipment rentals (11.82%), and natural spring tourism (2.73%), add to the diversity, showcasing the varied economic activities within the MSME sector in Ponggok. Detailed data on the demographic profile of participants are presented in

Table 1. The demographic details of participants.

Variable		Frequencies	Percentages (%)
Age	<25 years	16	14.55
	25–34 years	22	20
	35–44 years	23	20.91
	45–54 years	21	19.09
	>54 years	28	25.45
Gender	Male	53	48.18
	Female	57	51.82
Length of Time Involved in MSMEs	<1 year	23	20.91
	1–3 years	41	37.27
	4–6 years	26	23.64
	>6 years	20	18.18
Type of Business Managed	Eco-tourism	3	2.73
	Culinary	31	28.18
	Accommodation and Homestay	9	8.18
	Tourism Equipment Rental	13	11.82
	Aquaculture	19	17.27
	Catering Services	28	25.45
	Event Organizer	4	3.64
	Others	3	2.73

.

Based on the demographic description, MSME actors in Ponggok Village possess relevant and diverse characteristics, making them a suitable group to support the development of a comprehensive MSME empowerment model. This diversity reflects the village’s economic potential while providing a solid foundation for building a sustainable tourism village focused on long-term sustainability.

4.1. The Measurement Model (Outer Model)

The results of the outer model analysis are presented in

Table 2. The results of the outer model analysis.

	Cronbach’s Alpha	Composite Reliability (rho_a)	Composite Reliability (rho_c)	Average Variance Extracted (AVE)
Leadership	0.799	0.802	0.869	0.624
Innovation	0.709	0.711	0.837	0.632
Collaboration	0.736	0.744	0.851	0.656
Good Governance	0.847	0.847	0.909	0.769
Capacity Building	0.817	0.82	0.893	0.736
Technology in Governance	0.787	0.795	0.875	0.700
Technology in Service Quality	0.886	0.886	0.93	0.815
Technology in Transparency	0.882	0.883	0.928	0.81
MSME Empowerment	0.794	0.802	0.879	0.709
Tourism Development	0.78	0.783	0.859	0.605
Sustainable Tourism Villages	0.72	0.725	0.826	0.543

below.

The analysis results indicate that all constructs in the table demonstrate good reliability and validity. The Cronbach’s alpha values for all constructs are above 0.7, indicating adequate internal reliability within each construct. Furthermore, the composite reliability (rho_a and rho_c) values are also above 0.7 for all constructs, reflecting strong internal consistency. In terms of convergent validity, all constructs have Average Variance Extracted (AVE) values exceeding 0.5, meaning that the variance explained by the constructs is greater than the variance due to error. The constructs with the best performance are Good Governance, Service Quality, and Transparency, with the highest reliability and validity values, including AVE scores above 0.8. Constructs such as Innovation and Tourism Development show lower AVE values of 0.632 and 0.605, respectively, but still meet the minimum validity criteria. Overall, the model satisfies the standards of reliability and validity, making it suitable for further analysis with a solid construct structure.

The analysis of the outer loading results indicates that the indicators for each construct are valid and effectively reflect their respective variables, as detailed in

Table 3. Outer Loading.

Symbol	Indicator	Variables	Outer Loading
X1.1	Visionary Leadership	Leadership	0.835
X1.2	Decision-Making		0.759
X1.3	Inspiring Teams		0.778
X1.4	Adaptive Leadership		0.785
X2.1	Product Innovation	Innovation	0.788
X2.2	Process Innovation		0.809
X2.3	Market Innovation		0.787
X3.1	Stakeholder Engagement	Collaboration	0.750
X3.2	Resource Sharing		0.813
X3.3	Partnerships		0.863
X4.1	Accountability	Good Governance	0.911
X4.2	Policy Clarity		0.921
X4.3	Fairness		0.793
X5.1	Managerial Training	Capacity Building	0.913
X5.2	Technical Training		0.771
X5.3	Knowledge Sharing		0.883
M1.1	E-Governance Framework	Technology in governance	0.834
M1.2	Data-Driven Decision-Making		0.828
M1.3	Technology Integration		0.847
M2.1	Operational Efficiency	Service Quality	0.92
M2.2	Digital Accessibility		0.931
M2.3	Customized Service Delivery		0.856
M3.1	Transparent Financial Reporting	Transparency	0.920
M3.2	Supply Chain Visibility		0.843
M3.3	Customer Feedback Accessibility		0.934
Y1.1	Operational Efficiency	MSME Empowerment	0.787
Y1.2	Resource Utilization		0.874
Y1.3	Stakeholder Engagement		0.862
Y2.1	Economic Impact	Tourism Development	0.714
Y2.2	Community Participation		0.848
Y2.3	Cultural Preservation		0.801
Y2.4	Infrastructure Development		0.742
Y3.1	Environmental Sustainability	Sustainable Tourism Villages	0.726
Y3.2	Community Resilience		0.765
Y3.3	Economic Viability		0.724
Y3.4	Long-Term Benefits		0.731

. In the Leadership construct, the indicator Visionary Leadership (X1.1) has the highest outer loading value (0.835), emphasizing that the ability to set a clear strategic direction is the most critical aspect of leadership. Other indicators, such as Adaptive Leadership (X1.4) (0.785) and Inspiring Teams (X1.3) (0.778), also contribute significantly, while Decision-Making (X1.2) has a lower value (0.759) but remains valid. In the Innovation construct, Process Innovation (X2.2) records the highest value (0.809), showing that introducing innovative operational methods is the key element of innovation, followed by Product Innovation (X2.1) (0.788) and Market Innovation (X2.3) (0.787). For the Collaboration construct, the indicator Partnerships (X3.3) has the highest value (0.863), indicating that productive partnerships are the most important aspect of collaboration, followed by Resource Sharing (X3.2) (0.813) and Stakeholder Engagement (X3.1) (0.750), which also contribute significantly. In the Good Governance construct, the indicator with the highest value is Policy Clarity (X4.2) (0.921), emphasizing the importance of clear and consistent regulations, followed by Accountability (X4.1) (0.911) and Fairness (X4.3) (0.793). Meanwhile, in the Capacity Building construct, Managerial Training (X5.1) records the highest value (0.913), demonstrating the significant role of managerial training in capacity building, followed by Knowledge Sharing (X5.3) (0.883) and Technical Training (X5.2) (0.771).

Ponggok Tourism Village in Klaten, Indonesia, exemplifies successful rural tourism through strong leadership, innovation, collaboration, good governance, and capacity building. Visionary leaders transformed Umbul Ponggok’s natural springs into a unique underwater tourism destination, featuring creative attractions like underwater photography. The village also embraced innovation in technology by integrating digital booking systems, online marketing, and cashless payment methods to enhance the tourist experience and attract a broader audience. Collaboration among the community, government, and private sector ensured inclusive growth, while transparent governance through the Village-Owned Enterprise (BUMDes) reinvested tourism revenue into local development. Capacity-building initiatives empowered residents with skills in hospitality, technology, and sustainability, enhancing the quality of tourism services. This holistic approach has turned Ponggok into a thriving economic hub and a model for rural tourism development.

In the Governance construct, the indicator Technology Integration (M1.3) has the highest value (0.847), showing the importance of integrating technology to improve efficiency and transparency, followed by E-Governance Framework (M1.1) (0.834) and Data-Driven Decision-Making (M1.2) (0.828). For the Service Quality construct, the indicator with the highest value is Digital Accessibility (M2.2) (0.931), highlighting the importance of digital accessibility in enhancing service quality, followed by Operational Efficiency (M2.1) (0.920) and Customized Service Delivery (M2.3) (0.856). In the Transparency construct, Customer Feedback Accessibility (M3.3) has the highest value (0.934), indicating the significance of accessibility to customer feedback, followed by Transparent Financial Reporting (M3.1) (0.920) and Supply Chain Visibility (M3.2) (0.843).

Ponggok Tourism Village in Klaten leverages technology to enhance governance, service quality, and transparency. Digital tools streamline financial management and decision-making processes for the Village-Owned Enterprise (BUMDes), ensuring efficient and accountable governance. Service quality is improved through online booking platforms, experiences for underwater photography attractions, and free Wi-Fi for tourists. Transparency is prioritized by using digital systems to track and publicly share financial and operational data, fostering community trust. These innovations position Ponggok as a model for smart tourism, combining efficiency, enriched visitor experiences, and strong public accountability.

For the MSME Empowerment construct, the indicator with the highest value is Resource Utilization (Y1.2) (0.874), emphasizing the importance of optimizing resource usage, followed by Stakeholder Engagement (Y1.3) (0.862) and Operational Efficiency (Y1.1) (0.787). In the Tourism Development construct, Community Participation (Y2.2) has the highest value (0.848), highlighting the importance of community involvement in tourism, followed by Cultural Preservation (Y2.3) (0.801) and Infrastructure Development (Y2.4) (0.742), while Economic Impact (Y2.1) has a lower value (0.714) but remains valid. Finally, in the Sustainable Tourism Villages construct, the indicator with the highest value is Community Resilience (Y3.2) (0.765), showing the importance of community resilience, followed by Environmental Sustainability (Y3.1) (0.726), Economic Viability (Y3.3) (0.724), and Long-Term Benefits (Y3.4) (0.731). Overall, the outer loading results indicate that most indicators have values > 0.7, signifying good convergent validity. Indicators with the highest values, such as Policy Clarity (X4.2), Digital Accessibility (M2.2), and Customer Feedback Accessibility (M3.3), strongly contribute to their respective constructs. No indicators have values below 0.7, ensuring that all indicators are valid and support the quality of the model’s measurement.

Ponggok Tourism Village in Klaten showcases a comprehensive approach to sustainable tourism by excelling in operational efficiency, resource utilization, stakeholder engagement, and community participation. Through digital systems for ticketing and financial management, Ponggok achieves smooth operations while maximizing its natural spring resources for innovative attractions. Collaboration among local government, private sector partners, and the community ensures inclusive planning and management. Active participation of residents fosters a sense of ownership and pride, while efforts to preserve local traditions, crafts, and cuisine maintain the village’s cultural identity. Revenue from tourism is reinvested in infrastructure development, including roads, public facilities, and internet connectivity, improving both tourism and residents’ quality of life.

Ponggok emphasizes environmental sustainability by adopting eco-friendly practices, such as waste management systems, and protecting natural resources. Economic impact is significant, with tourism generating revenue, creating jobs, and driving the local economy, all managed transparently through the Village-Owned Enterprise (BUMDes). Community resilience is bolstered through diversified income streams and skills training, enabling adaptability to challenges. By ensuring economic viability and prioritizing long-term benefits, Ponggok has become a model for integrated rural tourism development that balances economic growth, cultural preservation, and environmental stewardship for sustainable progress.

The results of the PLS-SEM analysis presented in the diagram, as shown in Figure 8, demonstrate the relationships between key factors influencing MSME empowerment, tourism development, and sustainable tourism villages. Figure 8 illustrates that MSME empowerment is a key factor influenced by various elements, including leadership, innovation, collaboration, good governance, and capacity building. MSME empowerment has a significant direct impact on tourism development and sustainable tourism villages. Furthermore, tourism development is also influenced by the implementation of technology in governance, optimization of service quality through digitalization, and enhanced transparency using technology-based systems. A more detailed analysis of the relationships between these variables, based on the PLS-SEM method, will be presented in the following sections to provide a comprehensive understanding of the direct and indirect effects among the elements in this model.

4.2. Structural Model Analysis (Inner Model)

The results of the collinearity evaluation, which includes the calculation of the Variance Inflation Factor (VIF) to confirm the absence of multicollinearity issues (VIF ≤ 5), are presented in

Table 4. The result of the Variance Inflation Factor (VIF).

Symbol	Indicator	Variables	VIF
X1.1	Visionary Leadership	Leadership	2.518
X1.2	Decision-Making		1.441
X1.3	Inspiring Teams		2.270
X1.4	Adaptive Leadership		1.566
X2.1	Product Innovation	Innovation	1.439
X2.2	Process Innovation		1.428
X2.3	Market Innovation		1.504
X3.1	Stakeholder Engagement	Collaboration	1.291
X3.2	Resource Sharing		1.614
X3.3	Partnerships		1.717
X4.1	Accountability	Good Governance	3.947
X4.2	Policy Clarity		4.111
X4.3	Fairness		1.464
X5.1	Managerial Training	Capacity Building	3.083
X5.2	Technical Training		1.398
X5.3	Knowledge Sharing		2.826
M1.1	E-Governance Framework	Governance	1.472
M1.2	Data-Driven Decision-Making		1.799
M1.3	Technology Integration		1.829
M2.1	Operational Efficiency	Service Quality	1.734
M2.2	Digital Accessibility		4.422
M2.3	Customized Service Delivery		1.898
M3.1	Transparent Financial Reporting	Transparency	4.153
M3.2	Supply Chain Visibility		4.406
M3.3	Customer Feedback Accessibility		1.827
Y1.1	Operational Efficiency	MSME Empowerment	1.316
Y1.2	Resource Utilization		1.719
Y1.3	Stakeholder Engagement		1.797
Y2.1	Economic Impact	Tourism Development	4.715
Y2.2	Community Participation		1.690
Y2.3	Cultural Preservation		1.945
Y2.4	Infrastructure Development		2.177
Y3.1	Environmental Sustainability	Sustainable Tourism Villages	1.490
Y3.2	Community Resilience		1.494
Y3.3	Economic Viability		1.589
Y3.4	Long-Term Benefits		1.586

below.

The analysis results in Table 4 indicate that all VIF (Variance Inflation Factor) values are within the acceptable threshold (≤5), signifying the absence of multicollinearity issues in the model. This means that each indicator in the model can independently explain the variance without excessive influence from other indicators. Consequently, the model has a robust structure, allowing for accurate analysis of the relationships between variables without distortion from overlapping indicators. This reliability enhances the validity of the analysis results, ensuring that the interpretation of the variable effects in the model is trustworthy and provides relevant insights.

Based on the results of the Path Coefficients analysis in

Table 5. Path Coefficients between variables in the PLS-SEM model.

Variables		Path Coefficients
Capacity Building	MSME Empowerment	0.127
Collaboration		0.190
Good Governance		0.066
Innovation		0.335
Leadership		0.338
Technology in Governance	Tourism Development	0.004
Technology in Service quality		0.410
Technology in Transparency		0.171
MSME Empowerment		0.559
MSME Empowerment	Sustainable Tourism Villages	0.350
Tourism Development		0.630

, it was found that MSME empowerment is significantly influenced by several key factors. Leadership provides the largest contribution with a value of 0.338, indicating that the ability of leaders to provide direction, support, and strategy plays an essential role in empowering MSMEs. Additionally, Innovation also has a significant impact, with a value of 0.335, suggesting that adapting to changes and generating new ideas greatly supports MSMEs’ ability to grow. Other factors, such as Collaboration with a value of 0.190 and Capacity Building with a value of 0.127, also show positive contributions, although not as prominent as Leadership and Innovation. In contrast, Good Governance has a relatively small effect, with a value of 0.066, on MSME empowerment.

In the context of Tourism Development, it was found that Technology in Service Quality provides the largest impact, with a value of 0.410, highlighting the importance of ensuring high-quality services at tourist destinations to attract visitors and enhance their experiences. Technology in Transparency also contributes significantly, with a value of 0.171, indicating that clarity and openness in tourism management can increase public trust and support the growth of the sector. However, Technology in Governance shows a minimal effect on Tourism Development, with a value of only 0.004, suggesting that its impact may be more significant indirectly or through interactions with other variables.

Furthermore, MSME empowerment has a very significant influence on Tourism Development, with a value of 0.559. This emphasizes that MSMEs play a crucial role as the primary driver of the local economy in tourist destinations. Additionally, MSME empowerment also directly contributes to sustainable tourism villages with a value of 0.350, showing that MSMEs can support sustainability by creating local job opportunities, improving community welfare, and preserving cultural and environmental resources.

Ultimately, Tourism Development provides the largest contribution to sustainable tourism villages, with a value of 0.630. This demonstrates that well-planned and inclusive tourism development driven by MSMEs is vital for achieving sustainable tourism villages. The synergy between MSME empowerment and effective tourism development becomes a key strategy in creating a sustainable tourism ecosystem while supporting local economic growth. This analysis provides a comprehensive understanding of the relationships among variables and highlights the strategic role of MSMEs and tourism management in realizing sustainable tourism villages.

The next step is the analysis of the Coefficient of Determination (R²), which evaluates the ability of independent variables to explain the dependent variables, and the results of this process are presented in

Table 6. The Coefficient of Determination (R²).

Variables	R-Square	R-Square Adjusted
MSME Empowerment	0.973	0.971
Tourism Development	0.960	0.959
Sustainable Tourism Villages	0.886	0.884

.

The analysis results in Table 6 show that all three variables significantly contribute to the dependent variable, as indicated by their high R-square and adjusted R-square values. MSME empowerment has the strongest contribution, with an R-square of 0.973 and an adjusted R-square of 0.971, meaning 97.1% of the variation in the dependent variable is explained by this model. Tourism Development also has a very significant impact, with an R-square of 0.960 and an adjusted R-square of 0.959, indicating the model explains 95.9% of the variation. Meanwhile, Sustainable Tourism Villages has a slightly lower contribution compared to the other two variables, with an R-square of 0.886 and an adjusted R-square of 0.884, but it still demonstrates a strong relationship with the dependent variable. Overall, these three variables collectively explain a substantial proportion of the variance in the dependent variable, with MSME empowerment being the most dominant factor.

4.3. Hypothesis Testing

Table 7. The results of hypothesis testing.

Hypotesis	Original Sample (O)	Sample Mean (M)	Standard Deviation (STDEV)	T-Statistics (|O/STDEV|)	p-Values	Result
H1: Leadership -> MSME Empowerment	0.334	0.329	0.058	5.752	0.000	Significant
H2: Innovation -> MSME Empowerment	0.348	0.353	0.081	4.304	0.000	Significant
H3: Collaboration -> MSME Empowerment	0.179	0.174	0.045	3.939	0.000	Significant
H4: Good Governance -> MSME Empowerment	0.069	0.073	0.034	2.069	0.039	Significant
H5: Capacity Building -> MSME Empowerment	0.125	0.125	0.042	2.956	0.003	Significant
H6: Governance -> Tourism Development	0.010	0.003	0.119	0.086	0.931	Not significant
H7: Service Quality -> Tourism Development	0.409	0.400	0.141	2.904	0.004	Significant
H8: Transparency -> Tourism Development	0.166	0.183	0.118	1.406	0.160	Not significant
H9: MSME Empowerment -> Sustainable Tourism Villages	0.365	0.357	0.142	2.577	0.010	Significant
H10: MSME Empowerment -> Tourism Development	0.556	0.555	0.058	9.649	0.000	Significant
H11: Tourism Development -> Sustainable Tourism Villages	0.616	0.620	0.138	4.457	0.000	Significant

presents the results of hypothesis testing related to factors influencing MSME empowerment, tourism development, and sustainable tourism villages. It evaluates the relationships between leadership, innovation, collaboration, good governance, capacity building, governance, service quality, transparency, and their impacts on MSME empowerment and tourism development outcomes.

Based on the analysis in Table 7, several factors significantly influence MSME empowerment, tourism development, and sustainable tourism villages. Leadership, innovation, collaboration, good governance, and capacity building show a positive and significant impact on MSME empowerment. Among these factors, leadership and innovation have a greater influence compared to the others. This indicates that a structured and innovative approach is crucial to supporting the success of MSME empowerment.

In the context of tourism development, technology in service quality emerges as a significant factor, while governance and transparency do not show a significant impact. The integration of technology into service quality enhances efficiency and customer satisfaction, making it a crucial driver for tourism development. Tourism development is also significantly influenced by MSME empowerment, demonstrating a close relationship between successful MSME empowerment and the advancement of the tourism sector. Thus, MSME empowerment becomes one of the key elements in driving growth and strengthening the tourism sector.

Finally, the sustainability of tourism villages is significantly influenced by tourism development and MSME empowerment. The strong impact of tourism development on sustainable tourism villages indicates that effective tourism strategies can support sustainability goals. Therefore, MSME empowerment is not only crucial for the economic sector but also serves as a fundamental foundation for promoting the sustainability of tourism villages in the future. These results will serve as a guideline for designing interview questions in the next stage of the research process.

4.4. Thematic Analysis Results: Insights from Interviews with MSME Actors, Facilitators, and Local Government Officials

The thematic analysis was based on interviews with MSME actors, facilitators, and local government officials. These interviews revealed seven key themes that align with the research findings and provide deeper insights into the dynamics of MSME empowerment, tourism development, and sustainable tourism villages.

5. Leadership and Innovation as Key Drivers of MSME Empowerment

Interviews with MSME actors consistently highlighted the importance of effective leadership in providing clear direction, fostering motivation, and ensuring access to critical resources. Facilitators explained that strong leadership, particularly from local government officials, plays a crucial role in guiding MSMEs to adopt modern business practices and overcome challenges. Innovation was also identified as a central driver, with MSME actors emphasizing that adopting digital tools, such as e-commerce platforms, and creating unique products significantly enhanced their competitiveness. Local government officials supported this, noting that regions with proactive and innovative leaders tend to achieve greater success in empowering MSMEs. This finding underscores the need for structured leadership training and innovation-driven initiatives to support MSME growth.

6. Good Governance as a Foundation for MSME Empowerment

Good governance emerged as a foundational factor in MSME empowerment. MSME actors shared that when local governments implemented transparent policies, provided regulatory clarity, and allocated resources equitably, it created an enabling environment for their businesses to thrive. Facilitators highlighted that good governance practices, such as timely financial support, accessible infrastructure, and participatory decision-making, foster trust and confidence among MSMEs. Local government officials acknowledged that accountability and transparency in governance processes strengthened collaboration with MSMEs and stakeholders, leading to improved outcomes. These findings indicate that good governance principles, including inclusivity, transparency, and accountability, are critical for sustaining MSME empowerment.

7. Collaboration and Capacity Building to Strengthen MSMEs

Collaboration between MSMEs, facilitators, and local government officials was identified as a significant driver of MSME development. MSME actors shared success stories of partnerships with local governments and NGOs that provided access to funding, markets, and training programs. Facilitators emphasized that such collaborations helped MSMEs overcome resource constraints and expand their market reach. Capacity-building initiatives, such as workshops on financial literacy, digital marketing, and business operations, were reported to significantly improve MSME capabilities. Local government officials highlighted that targeted training programs tailored to the needs of MSMEs yielded measurable improvements in their performance. These insights underscore the importance of fostering collaboration networks and organizing regular capacity-building programs.

8. Technology in Service Quality Enhances Tourism Development

The role of technology in improving service quality was a recurring theme across all respondent groups. MSME actors involved in tourism-related businesses, such as accommodations, local crafts, and culinary services, reported that integrating digital tools like online reservation systems, e-payment options, and social media marketing improved customer satisfaction and streamlined operations. Facilitators highlighted that technology not only increased efficiency but also enhanced the market visibility of MSMEs, enabling them to attract a broader audience. Local government officials emphasized the need for policies and programs to support wider adoption of technology, particularly for MSMEs in rural areas. This finding demonstrates that integrating technology into service delivery is essential for driving tourism development.

9. Technology in Governance and Transparency: Limited Impact on Tourism Development

While technology plays a significant role in governance and transparency, its direct impact on tourism development was found to be minimal. Respondents from all groups acknowledged that digital tools used by local governments, such as e-governance platforms, online licensing systems, and digital budget transparency, improved administrative efficiency and public trust. However, these advancements did not necessarily translate into measurable benefits for tourism development. MSME actors appreciated the streamlined processes enabled by technology in governance, such as faster permit approvals and reduced bureaucratic hurdles. However, they noted that these improvements had an indirect or negligible influence on their tourism-related activities. Facilitators highlighted that while digital governance tools increased transparency and accountability, they were often disconnected from tourism-specific initiatives. They emphasized the need for more targeted integration of technology to directly address the needs of MSMEs involved in tourism. Local government representatives admitted that while technology in governance enhanced operational efficiency, its application in tourism-related planning and development was underutilized. They acknowledged that a stronger focus on leveraging these tools for tourism development could yield better results. This finding indicates that while technology-driven governance and transparency contribute to a more enabling environment for MSMEs, their impact on tourism development is indirect and requires deliberate alignment with tourism-focused strategies to create meaningful outcomes.

10. MSME Empowerment as a Catalyst for Sustainable Tourism Villages

MSMEs that are consistently empowered are strongly associated with the success of sustainable tourist villages. The MSME actors in Ponggok Village shared their experiences on how initiatives such as product diversification, eco-friendly practices, and participation in community-based tourism programs contribute to sustainable tourism. For example, MSMEs in Ponggok have embraced innovative resource utilization methods by using local raw materials sustainably and adopting waste management practices that align with environmental goals. Operational efficiency has also been enhanced through capacity-building programs that equip MSMEs with the skills needed to streamline their production processes and improve service delivery. These efforts ensure resource optimization and reduce operational waste, directly contributing to sustainability. Furthermore, strong stakeholder engagement has been a cornerstone of success in Ponggok, with local MSMEs collaborating with government agencies, community leaders, and tourism boards to create a unified vision for sustainable tourism. This collaborative approach has bolstered community resilience by fostering a shared sense of responsibility and pride among villagers. By preserving cultural heritage and implementing eco-friendly practices, MSMEs in Ponggok not only support environmental sustainability but also create a distinct cultural identity that attracts tourists. Economic viability is evident in the village’s thriving tourism economy, where empowered MSMEs generate income, create employment opportunities, and enhance the village’s market reputation. The long-term benefits of integrating sustainability goals into MSME development strategies in Ponggok include improved environmental health, stronger community cohesion, and increased customer loyalty. The village’s success serves as a model for other tourism destinations, showcasing how empowered MSMEs can drive sustainable development while balancing economic growth and environmental preservation.

11. Interdependence Between Tourism Development and MSME Empowerment

The interviews revealed a strong interdependence between tourism development and MSME empowerment. MSME actors reported that improved tourism infrastructure, such as better transportation and amenities, attracted more visitors, which directly benefited their businesses. In turn, thriving MSMEs enhanced the tourism experience by offering unique local products, services, and attractions. Facilitators and local government officials noted that coordinated efforts to simultaneously develop tourism and empower MSMEs created a cycle of mutual growth, strengthening both the local economy and community welfare. This finding underscores the importance of integrating tourism and MSME development strategies to maximize their combined impact.

12. Discussion

This study provides a comprehensive analysis of MSME empowerment, tourism development, and sustainable tourism villages within the Indonesian rural context, addressing critical gaps in previous research. By incorporating the sustainability framework, Resource-Based View (RBV), and development transition theories, this research offers nuanced insights into the roles of leadership, innovation, governance, transparency, collaboration, capacity building, technology in governance, technology in service quality and technology in transparency. By focusing on Ponggok village, a successful tourism village in Indonesia, the research illustrates how these factors interact within a rural context and contribute to sustainable development. The findings emphasize the critical roles of these variables while uncovering several novel contributions that expand upon previous studies.

H1: 

Leadership has a significant positive impact on MSME empowerment.

The findings confirm that leadership plays a crucial role in empowering MSMEs, particularly in rural tourism ecosystems. Effective leadership provides clear direction, motivates stakeholders, and facilitates the adoption of innovative practices. The study advances prior research (e.g., [16,17]) by showcasing how visionary leadership in rural areas helps MSMEs align their operations with tourism development goals. In Ponggok, proactive leadership by local government officials enabled MSMEs to adopt digital tools (e.g., e-commerce platforms) and eco-friendly practices. Unlike previous studies, this research highlights the context-specific nature of leadership in overcoming resource constraints in rural communities. Structured leadership training programs tailored to rural MSMEs are essential for fostering this adaptive and community-driven approach.

H2: 

Innovation has a significant positive impact on MSME empowerment.

Innovation emerged as a key driver of MSME competitiveness, supporting findings from [69,70]. However, this study uniquely illustrates how process and market innovation contributes to MSME empowerment in rural tourism. MSMEs in Ponggok leveraged product innovation (e.g., creating eco-tourism packages) and process innovation (e.g., using digital marketing tools) to enhance their market reach and operational efficiency. The study emphasizes the interconnection between innovation and cultural preservation, as MSMEs incorporated local traditions into their offerings, aligning with the broader goals of sustainable tourism. This finding highlights the need for targeted programs that support digital upskilling and product diversification tailored to the tourism sector.

H3: 

Collaboration has a significant positive impact on MSME empowerment.

Collaboration between stakeholders of MSMEs, local governments, NGOs, and private enterprises was identified as a critical enabler of MSME empowerment. This supports findings from [25,32] but introduces a novel perspective by emphasizing network-based collaboration in rural tourism ecosystems. For example, partnerships in Ponggok provided MSMEs with access to funding, training programs, and markets. These collaborations addressed resource constraints and fostered knowledge-sharing initiatives, such as workshops on financial literacy and digital marketing. Unlike previous studies, this research highlights the importance of collaborative networks in building MSME capacity for tourism-specific challenges.

H4: 

Good governance has a significant positive impact on MSME empowerment.

Good governance emerged as a foundational factor for MSME empowerment. The study confirms prior research (e.g., [26]) by demonstrating that transparent policies and equitable resource allocation build trust among MSMEs. However, this research advances the discussion by identifying specific governance challenges, such as delays in funding disbursement and inadequate monitoring mechanisms, which hinder MSME growth. In Ponggok, participatory decision-making processes enabled MSMEs to contribute to resource planning and infrastructure development. This fosters a sense of ownership and strengthens collaboration. The study underscores the need for customized governance strategies that align transparency tools with sector-specific needs, such as tourism licensing and eco-certification programs.

H5: 

Capacity building has a significant positive impact on MSME empowerment.

Capacity building was found to significantly enhance MSME operational capabilities and resilience, supporting findings from [30,32]. This study adds a unique dimension by illustrating the role of targeted training programs in addressing the specific needs of tourism MSMEs. For example, MSMEs in Ponggok benefited from workshops on digital marketing, sustainable business practices, and financial management. Unlike broader studies, this research emphasizes the importance of integrated capacity-building initiatives that combine technical training with collaborative knowledge-sharing platforms, enabling MSMEs to adapt to market demands effectively.

H6: 

Governance technology has a limited impact on tourism development.

The study highlights a critical gap: while governance technologies (e.g., e-governance platforms, online licensing systems) improve administrative efficiency, their direct impact on tourism development is minimal. This finding expands on research by [27,84] by emphasizing the misalignment between governance tools and tourism-specific strategies. For example, while digital transparency tools streamlined bureaucratic processes, they did not address challenges faced by tourism MSMEs, such as marketing and funding. This underscores the need for sector-specific digital governance tools, such as tourism business directories and resource management platforms.

H7: 

Service quality has a significant positive impact on tourism development.

Technology-driven service quality improvements were identified as a critical factor for tourism development. MSMEs in Ponggok reported significant benefits from adopting digital tools like online reservation systems and e-payment options. These findings align with prior research (e.g., [84]) but add a new perspective by demonstrating how digital accessibility enhances customer satisfaction in rural contexts. This study emphasizes the need for policies that promote the adoption of technology in service delivery, particularly for MSMEs in remote areas. Digital tools not only improve operational efficiency but also enable MSMEs to engage with broader markets, driving tourism growth.

H8: 

Transparency has a limited impact on tourism development.

Although transparency tools (e.g., financial reporting systems) improved stakeholder trust, their direct impact on tourism development was limited. This finding challenges assumptions in previous research (e.g., [86]) by showing that transparent processes often have indirect or negligible effects on tourism-specific outcomes. For instance, while MSMEs appreciated streamlined permit approvals, these advancements did not significantly influence their operational success in the tourism sector. The study highlights the need for targeted transparency initiatives that directly address the challenges of tourism MSMEs, such as resource allocation and marketing support.

H9: 

MSME empowerment has a significant positive impact on tourism development.

Empowered MSMEs were found to be catalysts for tourism development, supporting findings by [93]. This study advances prior research by illustrating the cyclical relationship between MSME growth and tourism infrastructure development. For example, improved transportation networks in Ponggok attracted more visitors, boosting MSME revenues, while thriving MSMEs enhanced the tourism experience through unique local products and services.

H10: 

MSME empowerment has a significant positive impact on sustainable tourism villages.

The study highlights the pivotal role of MSMEs in achieving sustainability in tourism villages. MSMEs in Ponggok actively engaged in eco-friendly practices, such as waste management and cultural preservation, contributing to economic resilience and environmental sustainability. This finding expands on [21] by demonstrating how MSMEs integrate economic, social, and environmental goals into their operations.

H11: 

Tourism development has a significant positive impact on sustainable tourism villages.

Tourism development was found to significantly enhance the sustainability of tourism villages by fostering community participation and cultural preservation. This aligns with prior research (e.g., [98]) but introduces new insights into the role of community-based tourism initiatives in promoting social cohesion and environmental stewardship. For example, MSMEs in Ponggok collaborated with local communities to preserve cultural heritage, enhancing the authenticity and attractiveness of the village.

In conclusion, this study demonstrates that the empowerment of MSMEs, driven by leadership, innovation, collaboration, good governance, and capacity building, plays a pivotal role in fostering sustainable tourism villages, as framed by the sustainability framework, Resource-Based View (RBV), and development transition theories. By situating MSMEs within the interconnected economic, social, and environmental dimensions of sustainability, this research reveals how their growth not only enhances operational efficiency and market reach but also contributes to community development, cultural preservation, and ecological stewardship. Leadership and innovation emerged as transformative drivers, while governance and collaboration facilitated trust and resource sharing critical to MSME success. The findings also highlight the limitations of governance technology and transparency in directly impacting tourism development, underscoring the need for targeted strategies that align digital tools with sector-specific needs. This study advances the RBV by demonstrating how the strategic use of MSME resources such as human capital, financial capital, and relational capital can foster resilience and competitiveness in rural tourism. Furthermore, it integrates development transition theories by showing how tourism-induced social changes and infrastructure development create a mutually reinforcing cycle that drives inclusive and sustainable progress in tourism villages like Ponggok. These insights provide actionable pathways for aligning MSME empowerment and tourism strategies with broader sustainability goals.

13. Policy Implications

Based on the findings and discussions, the following policy implications are proposed to guide stakeholders in enhancing MSME empowerment, tourism development, and sustainable tourism villages, particularly within the Indonesian context. These implications are organized according to the critical factors highlighted in the study.

• Leadership and Innovation
  • Leadership Training: Provide targeted leadership training for local officials and MSME facilitators to foster adaptive and visionary leadership.
  • Innovation Grants: Offer financial support for MSMEs to adopt digital tools, diversify products, and implement eco-friendly practices.
  • Mentorship Networks: Establish mentorship programs connecting experienced leaders with MSMEs to share best practices.

2.

Governance and Transparency

• Tourism-Specific Governance Tools: Develop e-governance platforms tailored to tourism needs, such as streamlined licensing and eco-certification processes.
• Transparent Resource Allocation: Use digital tools to ensure equitable distribution of resources to MSMEs, especially in underserved regions.
• Participatory Governance: Encourage MSMEs and communities to contribute to decision-making through regular stakeholder forums.

3.

Collaboration and Capacity Building

• Public–Private Partnerships: Foster collaboration between governments, NGOs, and private actors to provide funding, training, and market access.
• Knowledge-Sharing Platforms: Create networks for MSMEs to share success stories and best practices.
• Tailored Training Programs: Focus on financial literacy, digital marketing, and sustainable business practices for MSMEs in tourism.

4.

Technology Adoption

• Subsidized Digital Tools: Provide financial support for MSMEs to adopt online reservation systems, e-payment platforms, and digital marketing tools.
• Digital Literacy Training: Incorporate technology training into capacity-building initiatives to enhance MSME operations.
• Integrated Platforms: Develop unified platforms that combine tourism planning, business registration, and market analytics.

5.

Sustainability and Community Engagement

• Green Certification: Introduce certification programs for MSMEs adopting eco-friendly practices, with tax benefits or marketing support.
• Sustainability Grants: Fund projects focusing on renewable energy, waste management, and eco-tourism development.
• Community-Based Tourism: Support programs that preserve cultural heritage and encourage MSME-community collaboration.

6.

Integrated Tourism and MSME Development

• Infrastructure Development: Prioritize transportation and utilities that directly benefit tourism MSMEs.
• Tourism Business Clusters: Encourage MSMEs to collaborate in offering comprehensive tourism packages.
• Community Participation: Promote inclusive tourism planning to align with local priorities and foster community ownership.

These policies aim to create a supportive ecosystem for MSMEs, aligning governance, innovation, and sustainability efforts to drive economic growth and sustainable tourism development in Indonesia’s rural regions.

14. Conclusions

This study explores the interconnected roles of leadership, innovation, governance, collaboration, capacity building, and technology in empowering MSMEs, advancing tourism development, and achieving sustainable tourism villages, with Ponggok as the case study. The findings emphasize the following key conclusions:

• MSME Empowerment as a Foundation for Growth:

Leadership, innovation, collaboration, governance, and capacity building have significant positive impacts on MSME empowerment. Among these factors, leadership and innovation stand out as the most influential, highlighting the importance of structured leadership training and fostering innovative practices. Good governance also plays a vital role in creating a transparent and supportive business environment that strengthens MSME trust and operational sustainability.

b.

Technology’s Transformative Role:

Technology in service quality significantly enhances tourism development by improving customer satisfaction and operational efficiency. However, the application of technology in governance and transparency shows limited direct impact on tourism, underscoring the need for alignment between e-governance tools and tourism-specific initiatives.

c.

MSME Empowerment Drives Tourism Development:

Empowered MSMEs directly contribute to tourism development by offering innovative products, eco-friendly practices, and community-based services that enhance the tourism experience. This empowerment not only supports the growth of the tourism sector but also creates opportunities for MSMEs to thrive through improved infrastructure and market access.

d.

Sustainable Tourism Villages Rely on MSME and Tourism Development:

Tourism development and MSME empowerment are closely interlinked and collectively drive the success of sustainable tourism villages. Empowered MSMEs foster cultural preservation, economic resilience, and social cohesion, while tourism development supports infrastructure improvements and community participation. Together, they create a mutually reinforcing cycle that strengthens local economies and promotes sustainability.

Policymakers and practitioners should prioritize developing comprehensive frameworks that foster inclusive leadership and innovation, ensuring alignment with local tourism strategies. Investments in capacity-building programs and technology adoption can enhance MSME capabilities and operational efficiency. Policies that encourage transparent governance and stakeholder collaboration are essential for creating resilient economic ecosystems and advancing sustainable tourism initiatives.

While this study provides robust insights, its focus on a single case limits generalizability. The reliance on self-reported data may introduce biases, and further analysis of longitudinal data could provide a more dynamic understanding of the interconnections between the variables. Additionally, the reliance on transition theory’s socio-technical dimension presents certain limitations. Transition theory often emphasizes technological innovations and governance frameworks but tends to under-represent the broader governance, transparency, and service quality complexities essential to sustainable tourism development.

Future studies should expand this framework to diverse geographical contexts and assess the scalability of the proposed model. Investigating the role of emerging technologies, such as AI and blockchain, in enhancing governance and transparency within tourism development could offer valuable perspectives. Research could also focus on bridging the socio-technical and socio-ecological dimensions within transition theory to address the interdependencies between technological advancements and ecological sustainability. Exploring the socio-cultural impacts of tourism-driven MSME empowerment would further enrich the discourse on sustainable development.