Sustainability of MSMEs from the IPAT perspective: econometric analysis of the impact of infrastructure and the environment on profitability and insolvency

This study aims to analyze the impact of the sustainability of MSMEs affected by infrastructure development and environmental factors on financial performance, especially profitability and insolvency in the Nusantara Capital City (IKN) in East Kalimantan. MSMEs have an important role in the national and local economies, but they are vulnerable to structural changes. The development of the IKN driven by infrastructure, technology, and sustainability provides strategic opportunities to increase the competitiveness and resilience of MSMEs within the framework of IPAT (Impact, Population, Affluence, Technology). This study uses a quantitative approach with the Partial Least Squares–Structural Equation Modelling (PLS-SEM) method to analyze the direct and indirect relationships between variables. The research sample consisted of 85 MSMEs that met the research criteria. The results of the study show that the sustainability of MSMEs does not have a significant direct influence on financial performance. On the contrary, infrastructure and environmental factors have a positive and significant influence. In addition, environmental factors significantly mediate the relationship between infrastructure and financial performance, while the mediating role in the relationship between MSME sustainability and financial performance is not proven. These findings show that the sustainability of MSMEs is highly dependent on the quality of infrastructure and environmental management. The application of the IPAT perspective at the micro level shows that the technological and environmental dimensions are able to transform MSME activities into improved financial performance. Policy implications emphasize the importance of integrating infrastructure development and environmental policies in strengthening the sustainable resilience of MSMEs.