Factors Affecting Intention to Adopt Halal Practices: Case Study of Indonesian Small and Medium Enteprises

Abstract

Purpose This study aims to investigate the effect of religiosity, government support, consumer demand, the expectation for higher revenue and competition intensity on Indonesian small and medium-sized enterprises’ (SMEs) intention to adopt halal practices.

Design/methodology/approach This study used a quantitative approach and surveyed 228 SME owners through electronic media and direct contact. The study then applied the structural equation modeling to evaluate the relationship between constructs. This study also conducted some modifications on the hypotheses structured to obtain the best model.

Findings This study found that religiosity, government support and expectation for higher revenue have positive and significant effects on SMEs’ intention to adopt halal practices; conversely, consumer demand and competition intensity do not have significant effects.

Originality/value While in Indonesia, many studies have been conducted on consumers as subjects concerning halal awareness and they revealed a positive effect on the intention to consume the products, still, to the best of the authors’ knowledge, there are no studies targeting producers, especially SMEs, as the research subjects. This study had fulfilled some gaps on contributing factors that encourage the adoption of halal practices on the producers’ side, especially on SMEs. Therefore, this study provided insights into how to bridge the producers’ and consumers’ interests regarding halal fulfillment. The findings also provided input on the policy formulation at the early stage of halal policy implementation.