Abstract
Small and Medium Enterprises (SMEs) face many challenges from the coming rapid changes such as technology advancement, competitions, limitations and supports from government regulations, and limitations in terms of capital supply, product knowledge, and company management. Building and maintaining the firm performance of SMEs can be achieved through external factors (environmental dynamism) and internal factors (managerial capabilities). By using the dynamic capabilities as an intervening variable, it is expected to have an impact on firm performance by measuring the perceptive from owners or managers of SMEs. By using PLS-SEM analysis, the selected samples in this study consisted of 30 owners or managers of SMEs from Surabaya, Indonesia. The results indicated that the environmental dynamism and managerial capabilities have a significant influence on firm performance with dynamic capabilities as the intervening variables. Environmental dynamism also has a significant influence on firm performance. Meanwhile, managerial capabilities do not have a significant influence on firm performance.
Highlights
Small and Medium Enterprises (SMEs) is a potential business that is highly considered by the government because the more people in entrepreneurship are, the better and stronger the economy of a region will be
The results of the estimated influence between environmental dynamism (ED) and dynamic capabilities (DC) on Small and Medium Enterprises indicated a path coefficient that was greater than the p-value (0.18 > 0.05) meaning that environmental dynamism (ED) has a significant effect on dynamic capabilities (DC)
The results of the estimated influence between managerial capabilities (MC) and dynamic capabilities (DC) on Small and Medium Enterprises indicated a path coefficient that was greater than the p-value (0.58 > 0.01) meaning that managerial capabilities (MC) have a significant effect on dynamic capabilities (DC)
Summary
Small and Medium Enterprises (SMEs) is a potential business that is highly considered by the government because the more people in entrepreneurship are, the better and stronger the economy of a region will be. By the presence of SMEs, local resources, local workers, and local financing can be optimally absorbed and used. Several factors affecting the performance of SMEs are the influence of internal and external factors. The success of an SME depends on the ability of people in it to manage internal and external factors through the analysis of environmental factors and the establishment and implementation of Journal of Entrepreneurship & Business, Vol., No 2. External factors are constructed from social networks, legality, government support, guidance, technology, and access to information (Sudiarta et al, 2014), while internal factors depend on internal capability management
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