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Dual Sector Entrepreneurship and Rural Poverty Reduction: The Mediating Role of Community Empowerment in Indonesia

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05 May 2026

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18 May 2026

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Abstract
This study examines the role of agricultural and tourism entrepreneurship in reducing rural poverty through community empowerment within a place-based development framework. Using data from 400 respondents in Jambi Province, Indonesia, and employing Partial Least Squares Structural Equation Modeling (PLS-SEM) combined with the Analytical Hierarchy Process (AHP), the results reveal that agricultural entrepreneurship (β = 0.482, p < 0.001) and tourism entrepreneurship (β = 0.361, p < 0.001) significantly enhance community empowerment. In turn, community empowerment has a strong negative effect on poverty (β = -0.533, p < 0.001). The mediation analysis confirms that empowerment fully mediates the relationship between entrepreneurship and poverty reduction. Furthermore, AHP results indicate that community empowerment is the highest policy priority (44.2%), followed by agricultural entrepreneurship (33.8%) and tourism entrepreneurship (22.0%). This study contributes to the literature by integrating dual-sector entrepreneurship and identifying empowerment as a key mechanism in sustainable and inclusive rural development.
Keywords: 
entrepreneurship
;  
community empowerment
;  
poverty reduction
;  
SEM-PLS
;  
AHP
;  
rural development
Subject: 
Business, Economics and Management  -   Economics

1. Introduction

Rural poverty remains a persistent and multidimensional challenge in developing countries. While entrepreneurship has been widely promoted as a key driver of economic growth and job creation, its effectiveness in reducing poverty depends on how well it is embedded within local socio-economic contexts. In many rural areas, economic activities are dominated by agriculture, while tourism has emerged as a complementary sector offering diversification opportunities. However, previous studies often examine these sectors separately and overlook the role of community empowerment as a critical mechanism linking economic activity to welfare outcomes. This study addresses this gap by integrating agricultural and tourism entrepreneurship within a place-based development framework and examining the mediating role of community empowerment in poverty reduction.

2. Materials and Methods

2.1. Literature Review

Entrepreneurship and Rural Development

Entrepreneurship is increasingly understood as a socially embedded process influenced by local resources, institutions, and networks. Agricultural entrepreneurship enhances productivity and income stability, while tourism entrepreneurship supports diversification and service-based economic expansion.

2.2. Community Empowerment

Community empowerment refers to the process of enhancing individuals’ and groups’ capacity to make decisions, access resources, and participate in economic activities. It plays a crucial role in ensuring that economic growth translates into inclusive development.

2.3. Hypothesis Development

H1: 
Agricultural entrepreneurship positively affects community empowerment
H2: 
Tourism entrepreneurship positively affects community empowerment
H3: 
Community empowerment negatively affects poverty
H4: 
Community empowerment mediates the relationship between entrepreneurship and poverty
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Figure 1. The conceptual model.
Figure 1. The conceptual model.
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This study employed a quantitative, field-based research design to examine the relationships between agricultural entrepreneurship, tourism entrepreneurship, community empowerment, and poverty reduction. A quantitative approach was considered appropriate given the study’s objective to test theory-driven relationships and to evaluate both direct and indirect effects among latent constructs within a structured analytical framework. Quantitative designs are widely used in entrepreneurship and development research to empirically test causal mechanisms and mediation effects linking economic activity to social outcomes (Creswell & Creswell, 2018; Hair et al., 2021).
The empirical setting of the study was Muaro Jambi Regency and Kerinci Regency in Jambi Province, Indonesia. These regions were purposively selected because they represent place-based local economies where agriculture remains a dominant livelihood sector and tourism has emerged as a complementary economic activity, while poverty persists as a structural challenge. Place-based development literature emphasizes that such contexts are particularly suitable for examining the interaction between entrepreneurship, community dynamics, and development outcomes (Rodríguez-Pose & Wilkie, 2019; OECD, 2021).
The unit of analysis consisted of individual community members who were actively engaged in agricultural and/or tourism-related economic activities, including business owners, workers, and participants in community-based enterprises. Primary data were collected through a structured questionnaire administered directly to respondents using a purposive sampling technique to ensure that all participants possessed relevant experience related to sectoral entrepreneurship and community economic activities. A total of 100 valid responses were obtained and included in the analysis. This sample size satisfies the minimum requirements for Partial Least Squares Structural Equation Modeling (PLS-SEM), which is particularly suitable for exploratory and prediction-oriented models with small to medium sample sizes in community-based research (Hair et al., 2021; Sarstedt et al., 2022).
The analytical framework of the study was developed based on economic development theory, human capital theory, and the enterprising communities perspective. Economic development theory emphasizes the role of entrepreneurship and innovation in strengthening productive sectors and fostering inclusive growth (Todaro & Smith, 2020), while human capital theory highlights the importance of skills, learning, and experiential knowledge in enhancing productivity and income-generating capacity (Becker, 2021). Complementing these perspectives, the enterprising communities literature conceptualizes entrepreneurship as a socially embedded and place-based process in which community empowerment plays a central role in shaping development outcomes (Welter et al., 2019; Urbano et al., 2020). Based on this framework, community empowerment was positioned as a mediating mechanism linking sectoral entrepreneurship and poverty reduction. Agricultural entrepreneurship was operationalized using indicators reflecting innovation in agricultural practices, product diversification, market orientation, and engagement in value-added activities. These indicators were adapted from prior empirical stud ies on entrepreneurial agriculture and rural development, which emphasize the importance of innovation and market integration for improving rural livelihoods (Santovito et al., 2021; Barrett et al., 2021). Tourism entrepreneurship was measured through indicators related to participation in tourism-related enterprises, service innovation, local ownership, and the utilization of cultural and natural resources, consistent with community-based tourism and tourism entrepreneurship literature (Ratten, 2022; Mensah et al., 2022). Community empowerment was conceptualized as a multidimensional construct capturing participation in economic decision-making, access to resources and information, skills development, and collective action. This conceptualization aligns with empowerment frameworks commonly applied in enterprising communities and inclusive development research (Urbano et al., 2020; Hussain et al., 2022). Poverty was measured using perceptual indicators reflecting economic vulnerability, income sufficiency, and the ability to meet basic household needs, an approach consistent with multidimensional poverty perspectives in community-level studies (Bourguignon, 2021; Ravallion, 2020). All constructs were measured using multi-item indicators adapted from established empirical studies and assessed using a five-point Likert scale ranging from strongly disagree to strongly agree.
Based on the proposed theoretical framework, the study assumes that entrepreneurial activities in both agriculture and tourism strengthen community empowerment by enhancing participation, capacity, and local economic agency. In turn, empowered communities are expected to experience lower levels of poverty due to improved control over economic resources, stronger collective action, and greater resilience to vulnerability. Community empowerment is therefore expected to mediate the relationship between sectoral entrepreneurship and poverty reduction, as suggested by prior mediation-based studies in entrepreneurship and poverty research (Preacher & Hayes, 2008; Hussain et al., 2022).
These assumed relationships were incorporated directly into the structural model and tested empirically rather than being treated as separate narrative hypotheses.
Data analysis was conducted using Structural Equation Modeling based on Partial Least Squares (PLS-SEM) with SmartPLS software. PLS-SEM was selected due to its ability to estimate complex models with multiple latent variables, its robustness to non-normal data distributions, and its effectiveness in testing mediation effects (Hair et al., 2021; Shmueli et al., 2019). The analysis followed a two-stage procedure, beginning with an assessment of the measurement model to evaluate internal consistency reliability, convergent validity, and discriminant validity, followed by an evaluation of the structural model to estimate path coefficients, coefficients of determination, and the significance of indirect effects using bootstrapping procedures (Henseler et al., 2015; Sarstedt et al., 2022).
Ethical considerations were observed throughout the research process. Participation in the study was voluntary, respondents were informed about the purpose of the research prior to data collection, and confidentiality and anonymity were guaranteed. All data were used solely for academic purposes and analyzed in aggregate form, in accordance with standard ethical guidelines for social science research (Saunders et al., 2019).

3. Methods

3.1. Research Design

This study employs a quantitative approach using survey data from 400 respondents involved in agricultural and tourism activities.

3.2. Data Analysis

Data were analyzed using:
SEM-PLS for causal relationships
AHP for policy prioritization

3.3. Validity and Reliability

All constructs meet:
AVE > 0.50
Composite Reliability > 0.70

4. Results

This section may be divided by subheadings. It should provide a concise and precise description of the experimental results, their interpretation as well as the experimental conclusions that can be drawn.
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Figure 1. Structural Model of the SEM-PLS Analysis.
Figure 1. Structural Model of the SEM-PLS Analysis.
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Table 1. SWOT Analysis Matrix.
Table 1. SWOT Analysis Matrix.
Strengths Weaknesses
Strong agricultural base; High social cohesion Limited financial access; Low digital literacy
Opportunities Threats
Agrotourism growth; "Desa Wisata" program Climate change; Commodity price volatility
The high mediation effect suggests that entrepreneurial activities must be accompanied by capacity building to effectively reduce "Income Deprivation" and "Vulnerability.".
The findings underscore that while agriculture is the primary economic driver, tourism provides necessary diversification. The SWOT matrix below summarizes the strategic position of Jambi’s rural economy.
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5. Discussion

The findings demonstrate that entrepreneurship contributes to poverty reduction indirectly through community empowerment. Agricultural entrepreneurship has a stronger effect due to its deep integration with local livelihoods, while tourism provides complementary benefits.
Most importantly, the results confirm that empowerment is the central mechanism through which economic activities translate into social outcomes. This supports the capability approach and highlights the importance of inclusive development strategies.
Key Contribution: Entrepreneurship alone is insufficient for poverty reduction unless embedded within empowerment processes that enhance local agency and participation

6. Conclusions

This study confirms that community empowerment plays a critical mediating role in linking entrepreneurship to poverty reduction. Policies should shift from sector-driven approaches toward empowerment-driven development strategies to achieve inclusive and sustainable rural development.

Supplementary Materials

The following supporting information can be downloaded at the website of this paper posted on Preprints.org. It includes questionnaire instruments, SEM-PLS measurement indicators, AHP pairwise comparison matrices, and additional statistical outputs.

Author Contributions

Conceptualization: M.R.R.; Methodology: M.R.R.; Software: M.R.R.; Validation: M.R.R.; Formal Analysis: M.R.R.; Investigation: M.R.R.; Resources: M.R.R.; Data Curation: M.R.R.; Writing – Original Draft Preparation: M.R.R.; Writing – Review and Editing: M.R.R.; Visualization: M.R.R.; Supervision: M.R.R.; Project Administration: M.R.R. All authors have read and approved the published version of the manuscript. .

Funding

Please add: This research received no external funding.

Institutional Review Board Statement

The study was conducted in accordance with the Declaration of Helsinki. Ethical review and approval were waived for this study because the research involved non-clinical social science survey data with minimal risk to participants and no collection of sensitive personal information.

Data Availability Statement

The data presented in this study are available from the corresponding author upon reasonable request. The data are not publicly available due to privacy and ethical considerations involving respondent confidentiality.

Acknowledgments

The authors would like to thank all respondents, local communities, and stakeholders in Jambi Province who participated in this research. Appreciation is also extended to academic colleagues and research assistants who contributed to data collection and technical support during the study.

Conflicts of Interest

The authors declare no conflict of interest.

Abbreviations

The following abbreviations are used in this manuscript:
Abbreviation Description
SEM-PLS Structural Equation Modeling–Partial Least Squares
AHP Analytic Hierarchy Process
MSMEs Micro, Small, and Medium Enterprises
MDPI Multidisciplinary Digital Publishing Institute
AVE Average Variance Extracted
CR Composite Reliability
SDGs Sustainable Development Goals
SWOT Strengths, Weaknesses, Opportunities, and Threats

Appendix A

Variable Indicator Code Indicator Description
Agricultural Entrepreneurship AE1 Innovation in agricultural production
Agricultural Entrepreneurship AE2 Market orientation in agriculture
Agricultural Entrepreneurship AE3 Value-added agricultural activities
Tourism Entrepreneurship TE1 Tourism service innovation
Tourism Entrepreneurship TE2 Community-based tourism participation
Tourism Entrepreneurship TE3 Sustainable tourism management
Community Empowerment CE1 Community participation
Community Empowerment CE2 Access to resources
Community Empowerment CE3 Capacity building
Poverty Reduction PR1 Increased household income
Poverty Reduction PR2 Reduced economic vulnerability
Poverty Reduction PR3 Improved economic opportunities

Appendix B

Relationship Path Coefficient (β) t-value p-value
Agricultural Entrepreneurship → Community Empowerment 0.482 9.21 0.000
Tourism Entrepreneurship → Community Empowerment 0.361 7.10 0.000
Community Empowerment → Poverty Reduction -0.533 11.32 0.000
Table A1. Coefficient of Determination (R²).
Table A1. Coefficient of Determination (R²).
Endogenous Variable R²
Community Empowerment 0.64
Poverty Reduction 0.58

Appendix B.2. AHP Priority Weights

Table A2. AHP Priority Ranking Results.
Table A2. AHP Priority Ranking Results.
Criterion Weight Rank
Community Empowerment 0.442 1
Agricultural Entrepreneurship 0.338 2
Tourism Entrepreneurship 0.220 3

Appendix B.3. SWOT Analysis Summary

Table A3. SWOT Matrix.
Table A3. SWOT Matrix.
Strengths Weaknesses
Strong agricultural base Limited human capital
Local resource availability Low access to finance
Community cohesion Weak market integration
Opportunities Threats
Tourism sector growth Climate change
Government support programs Market volatility
Digital transformation Policy uncertainty

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