Entrepreneurial Orientation and Business Motivation as Determinants of Micro and Small Enterprise Performance: The Mediating Role of Business Innovation
Abstract
Purpose: This study examines the effects of entrepreneurial orientation on business innovation and business performance, the effects of business motivation on business innovation and business performance, and the effect of business innovation on the performance of micro and small enterprises (MSEs).
Design/methodology/approach: This quantitative study employed an explanatory design and hypothesis testing. The unit of analysis comprised MSE owner-managers from a population of 229 enterprises. The sample size was calculated using Slovin's formula, yielding 146 respondents (63.76% of the population), who were selected through purposive sampling. Questionnaires were administered for one month, from January 1 to January 31, 2026, and all 146 respondents completed them. The resulting data were therefore considered sufficiently representative of the study population.
Findings: Path analysis shows that entrepreneurial orientation has positive and significant direct effects on business innovation and business performance, with standardized coefficients of 0.296 (p = 0.019) and 0.417 (p = 0.037), respectively. Business motivation also has positive and significant direct effects on business innovation and business performance, with standardized coefficients of 0.278 (p = 0.028) and 0.358 (p = 0.031), respectively. Business innovation, in turn, has a positive and significant direct effect on MSE performance, with a standardized coefficient of 0.293 (p = 0.048). These findings indicate that entrepreneurial orientation and business motivation, when underpinned by autonomy and responsiveness to environmental change, foster creativity and strengthen business innovation. This enables enterprises to manage resources more effectively and efficiently and thereby improve their performance. Business innovation centered on digital platforms and social media allows enterprises to serve customers more quickly, conveniently, and flexibly, without the constraints of time or location, which further improves performance. MSE performance can be enhanced when management responds to environmental change, translates that responsiveness into business processes, and promotes creativity and innovation across business management, managerial functions, and the business cycle. Entrepreneurial orientation, business motivation, and business innovation are therefore relevant antecedents of MSE performance. Accordingly, H1, H2, H3, H4, H5 are supported because all tested direct effects are positive and significant at the 5% level.
Paper type: Research paper
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