INTEGRATING LOCAL WISDOM AND ISLAMIC VALUES TO IMPROVE MSME PERFORMANCE: EVIDENCE FROM THE ÉMBU TRADITION IN MADURA

Abstract

Local wisdom and religious values play an important role in shaping business practices in culturally rich communities. However, previous studies have generally examined local traditions, Islamic values, and business ethics separately, providing limited understanding of how these factors interact to influence the performance of micro, small, and medium enterprises (MSMEs). This study investigates the influence of the Émbu tradition, a distinctive local trading tradition in Madura, on MSME performance by examining the mediating roles of Islamic faith and business ethics and the moderating role of Madurese culture. A quantitative approach was employed using survey data collected from 58 MSME owners in Madura. The data were analyzed using Moderated Regression Analysis (MRA). The findings indicate that the Émbu tradition has a significant positive effect on MSME performance, both directly and indirectly through Islamic faith and business ethics. Furthermore, Madurese culture strengthens the relationship between the Émbu tradition and business performance, highlighting the importance of cultural context in sustaining ethical business practices. This study contributes to the literature by integrating local wisdom, religious values, and business ethics into a unified framework for explaining MSME performance. The findings also provide practical insights for policymakers and business practitioners seeking to strengthen MSME sustainability by preserving local traditions while reinforcing religious and ethical values. Beyond its practical implications, this study contributes to the growing discourse on religious and cultural sciences by demonstrating how local wisdom and Islamic values interact to shape ethical and culturally embedded entrepreneurial practices.