International Journal of Entrepreneurship volume 23, Issue 4, 2019 1 1939-4675-23-4-309 THE EFFECT OF FINANCIAL AND TAXATION LITERACY ON SUSTAINABLE COMPETITIVE ADVANTAGE THROUGH BUSINESS GROWTH: A STUDY OF CREATIVE MSMEs IN SPECIAL REGION OF YOGYAKARTA, INDONESIA Siti Resmi, Sekolah Tinggi Ilmu Manajemen YKPN Reza Widhar Pahlevi, Universitas Islam Indonesia Fran Sayekti, Universitas Teknologi Yogyakarta ABSTRACT This purpose of this study is to test and analyze the effect of financial and taxation literacy on sustainable competitive advantage through business growth. This study uses the source of primary data through questionnaire that is distributed to Creative MSMEs actors in Daerah Istimewa Yogyakarta (DIY). The respondent of this study is 269 Creative MSMEs actors with the population from all Creative MSMEs in DIY. The data analysis uses Structural Equation Modeling (SEM) with AMOS technique. The result of this study proves that financial and taxation literacy has an effect on business growth and competitive advantage. Business growth can mediate the effect of financial and taxation literacy toward the competitive advantage of Creative MSMEs in DIY. Keywords: Financial Literacy, Taxation, Business Growth, Competitive Advantage, Creative MSMEs. INTRODUCTION The dynamics of MSMEs have provided significant contribution toward the economy in Indonesia. In Daerah Istimewa Yogyakarta (DIY), the MSMEs have provided economical contribution for 95% (http://jogja.tribunnews.com, accessed on Juli 21, 2018). Increasingly competitive market condition and limited natural resources make MSMEs require new breakthroughs by relying on creative and innovative human resources as basic capital in facing free market competition. DIY is rich in traditional culture and diverse characters of its people, so that the creative industry has a big potential to be developed. Creative MSMEs have very high resilience, tenacity, and innovation which make them become very competitive to penetrate global market (Fitriati, 2014). Creative MSMEs often experience delay in its development because there are many conventional problems that have not been resolved completely, such as HR capacity, financing, marketing, and others related to business management that makes it difficult for them to compete with large companies (Abor & Quartey, 2010). Strategic efforts are needed to improve the performance and sustainability of MSMEs. Some literatures prove that the capability of a company in recognizing and accessing financial resources will have an impact on the company’s growth rate (Cole & Fernando, 2008; Bruhn & Zia, 2013). Several studies show positive finding about the importance of MSMEs in financial and taxation literacy. MSMEs that have good understanding of finance and taxation will generate business growth (Clark, 2014; Xu