Local Regulations as Moderation in the Influence of Community Knowledge Sharing on the Business Performance of Traditional Medicine SMES

Objective: This study aims to analyze the impact of community knowledge sharing (CKS) on the business performance (BP) of traditional medicine SMEs and to analyze the moderating role of local regulations (LR) in this relationship. Theoretical Framework: The theoretical framework used focuses on the importance of CKS and regulations in supporting business performance through increasing shared knowledge and compliance with regulations. Method: The research method used is a quantitative survey by distributing questionnaires to 184 owners and managers of traditional medicine SMEs in East Java. Data analysis was carried out using structural equation modeling (SEM). Results and Discussion: The results of the study indicate that CKS does not have a significant effect on the business performance of SMEs. Likewise, the moderating role of local regulations is not significant in strengthening the relationship between CKS and business performance. However, these results highlight that increasing direct knowledge sharing may not be enough to drive the business performance of traditional medicine SMEs, which can be caused by resource constraints, local culture, and regulatory complexity. Research Implications: The implications of this study suggest that to improve the performance of traditional medicine SMEs, local policies need to focus more on other factors such as product innovation, better regulatory compliance, and digital marketing. Originality/Value: The originality of this study lies in the analysis of the combination of CKS and LR in the context of traditional medicine SMEs that have previously been rarely studied.