Examining Government Support: Dynamics of Innovation and Human Capital in VOEs (BUMDES) Performance

Abstract

This study investigates the role of government support in enhancing the local economy by examining the effect of government support on the relationship between Human Capital, Innovation Capability, and Village-Owned Enterprises (VOEs) performance. The study involved 25 VOEs that participated in financial training provided by the Community and Village Empowerment Office in Wonogiri Regency, using the entire population as the sample. The data analysis utilizing SmartPLS 3.0 revealed that innovation capability positively affects VOEs performance, while human capital does not. Government support did not significantly influence the impact of innovation capability or human capital on performance. Despite substantial government training initiatives, VOEs performance showed limited improvement, highlighting a gap between training efforts and actual outcomes. The research suggests the need for stricter monitoring, better training standards, and ongoing mentorship to fully realize the benefits of external assistance. Additionally, improving managerial capacity through leadership development is recommended. A limitation of the study is the small sample size, focusing solely on VOEs receiving local government support, suggesting
future research should examine a wider range of VOEs.