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Micro and small enterprises (MSEs) are noted to be the important sector which plays role in economy of a country. In Indonesia, there are 62.9 million units of MSEs which consisted of 62.1 million micro enterprises and 757.090 small enterprises. All of these MSEs contributed for 57.94 % of Indonesia’s Gross Domestic Product or worth IDR 4.303 trillion, and permeate up to 110.8 million workers. Malang City is a city in Indonesia, which has a lot of MSEs that are engaged in the field of food, clothing, and various home industries producing handicrafts as souvenirs. The potential of handicrafts in this city is promising. With the locals marketizing different kinds of handicraft product themselves, it in fact eases the tourists to find handicraft products as souvenirs typical  of Malang. Typical in this sense means that handicraft products produced by the MSEs are based on the historical and cultural aspect of the city. Problems that exist were that there was no best model that could be used by the MSEs to create handicraft products identifiably typical of Malang. The aim of this study is to compare several alternatives of the structural model so that the best model can be obtained. It was done by using Partial Least Square (PLS) method in which customer needs were identified. This research gives the best structural model among the alternatives created for the MSEs so that they could design the handicraft products based on historical values, local culture and consumer needs. The designs as the innovation are products putting the word “Malang”; using the picture of “City Monument”; the image of “Lion’s Head” and “Lotus” as symbol of the city; the handicraft product must be beautiful when being enjoyed visually; it has to have sharp colors, unique and dynamic impression, functional aspect and be easy to carry

The model selection for micro and small enterprises (MSEs) for handicraft product design innovation in Malang