The Effect of Market Orientation, Entrepreneurial Orientation, Innovation and Competitive Advantage on Business Performance of Indonesian MSMEs

Abstract

Purpose: The objective of this study was to determine the effect of market orientation, entrepreneurial orientation, innovation, and competitive advantage on MSMEs (Micro Small and Medium Enterprises) business performance.   Design/methodology/approach: This type of research is quantitative with a case study research design. The implementation of the research was carried out in Indonesia, especially in Lamongan district, East Java, Indonesia. The research subjects were MSMEs owners/managers with a total sample of 302 using SPSS-AMOS 22 SEM (Structural Equation Modeling) analysis.   Findings:  The results of this study indicate that there is an significant influence of market orientation, entrepreneurial orientation, competitive advantage on business performance, while innovation has no significant influence on MSMEs business performance.   Research, Practical & Social implications:  The theoretical implication of this research is to increase knowledge about market orientation and entrepreneurial orientation as well as increase innovation and competitive advantage to get maximum MSMEs business performance. The results of this study can provide information to the government and organizations related to MSMEs. In this case, the Office of Cooperatives and Micro Enterprises, the Office of Industry and Trade in Lamongan district, East Java, Indonesia.   Originality/value: The results of the Structural Equation Modeling evaluation with the univariate normality test showed an excellent critical skewness ratio value, and the kurtosis indicated data was normally distributed, and the data is feasible to use. Than 7 methods (X2-Chi square, Sign Probability, CMIN/DF, GFI, AGFI, TLI, CFI, and RMSEA) are used to measure the fit of the model in SEM there are 6 criteria that are fit from 7 existing criteria, so it can be concluded that this measurement model has a good fit level. The results of hypothesis testing affect market orientation has a significant on MSMEs performance, entrepreneurial orientation has a significant on MSMEs performance, competitive advantage has a significant on MSMEs performance, market orientation has a significant on innovation, market orientation has a significant to competitive advantage, entrepreneurial orientation has a significant on innovation, entrepreneurial orientation has a significant on competitive advantage, competitive advantage has a significant on innovation, and  innovation  has not a significant on MSMEs performance.