Drivers of Small Firm Performance: The Urgency of Innovation Capabilities, Entrepreneurial Orientation, and Creativity

Moh Solehatul Mustofa, Kemal Budi Mulyono


This research focuses on creating a theoretical framework for enhancing business innovation capabilities, aiming to boost the performance of small enterprises in Indonesia. The primary goal of this study is to identify and establish the fundamental elements necessary for fostering innovation within these businesses, thereby improving their overall effectiveness. This research collected data through a questionnaire survey from 250 active small business owners across Indonesia, distributed across five major islands: Sumatra, Kalimantan, Java, Sulawesi, and Papua. The sample size was determined using the inverse root square method, employing multistage random sampling. The study used Warp PLS-SEM to analyze the determinants of small firm performance. The study shows that business creativity, entrepreneurial mindset, and business innovation skills act as significant mediators between knowledge sharing and the performance of small companies. However, knowledge sharing itself does not directly affect business performance. The findings highlight how entrepreneurial mindset, creativity, and innovation capabilities effectively mediate the impact of knowledge sharing on each small business owner’s performance. We suggest that small business owners carefully select pertinent information and knowledge to enhance their business creativity, entrepreneurial mindset, and innovation capabilities. This prudent approach drives the improvement of their company’s performance, emphasizing the importance of strategic and thoughtful information selection for overall business enhancement. This study offers evidence and examples emphasizing the critical importance of business innovation capabilities for small- and medium-sized business proprietors. Earlier research solely focused on testing these capabilities within corporations, resulting in an unexplored research gap necessitating additional elaboration and investigation.


Keywords: knowledge sharing, entrepreneurial orientation, business creativity, business innovation capability, business performance.



Full Text:



ABEYRATHNA, M. A., & WIJESINGHE, D. M. (2020). The importance of spatial factors for entrepreneurial orientation of rural entrepreneurs: A critical review. International Journal of Innovation and Economic Development, 6(3), pp. 20-28.

ALAVI, M., & LEIDNER, D. E. (2001). Review: Knowledge management and knowledge management systems: Conceptual foundations and research issues. MIS Quarterly, 25(1), 107.

AMABILE, T. M. (1997). Motivating creativity in organizations: On doing what you love and loving what you do. California Management Review, 40(1), pp. 39-58.

BARNEY, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), pp. 99-120.

BAGHEL, D., PAWAR, P. G., INGALE, P., et al. (2023). Effects of creativity and innovation on the entrepreneurial performance of the family business with special reference to banking sector. International Journal of Professional Business Review, 8(4), e0996.

CANIËLS, M. C., & RIETZSCHEL, E. F. (2015). Organizing creativity: Creativity and innovation under constraints. Creativity and Innovation Management, 24(2), pp. 184-196.

CLARK, B. H., ABELA, A. V., & AMBLER, T. (2006). An information processing model of marketing performance measurement. Journal of Marketing Theory and Practice, 14(3), pp. 191-208.

COVIN, J. G., GREEN, K. M., & SLEVIN, D. P. (2006). Strategic process effects on the entrepreneurial orientation–sales growth rate relationship. Entrepreneurship Theory and Practice, 30(1), pp. 57-81.

CUMMINGS, J. N. (2004). Work groups, structural diversity, and knowledge sharing in a global organization. Management Science, 50(3), pp.352-364.

EGAN, J. (2001). Relationship Marketing: Exploring Relational Strategies in Marketing. Financial Times/Prentice Hall, London.

FOLTEAN, F. (2007). The Entrepreneurial Approach in Marketing, Management & Marketing, 2(1), pp. 71-78

GAVRILOVA, T., KUDRYAVTSEV, D., & MENSHIKOVA, A. (2015). Innovations in organisational knowledge management - Typology, methodology and recommendations. Proceedings of the 7th International Joint Conference on Knowledge Discovery, Knowledge Engineering and Knowledge Management.

GRAWE, S. J., CHEN, H., & DAUGHERTY, P. J. (2009). The relationship between strategic orientation, ser-vice innovation, and performance. International Journal of Physical Distribution & Logistics Management, 39(4), pp. 282-300.

JANSSEN, M., STOOPENDAAL, A., & PUTTERS, K. (2015). Situated novelty: Introducing a process perspective on the study of innovation. Research Policy, 44(10), pp. 1974-1984.

KABANDA, G. (2022). How to succeed as an entrepreneur in Africa. Journal of Media Management and Entrepreneurship, 4(1), pp. 1-13.

KEH, H. T., NGUYEN, T. T., & NG, H. P. (2007). The effects of entrepreneurial orientation and marketing information on the performance of SMEs. Journal of Business Venturing, 22(4), pp. 592-611.

KOCK, N., & HADAYA, P. (2018). Minimum sample size estimation in PLS-SEM: The inverse square root and gamma-exponential methods. Information Systems Journal, 28(1), pp. 227-261.

KOCK, N. (2010). Using WarpPLS in e-collaboration studies: An overview of five main analysis steps. International Journal of e-Collaboration, 6(4), pp. 1-11.

KODAMA, M. (2017). Developing strategic innovation in large corporations-the dynamic capability view of the firm. Knowledge and Process Management, 24(4), pp. 221-246.

KODAMA, M. (2018). Collaborative dynamic capabilities: The dynamic capabilities view. Collaborative Dynamic Capabilities for Service Innovation, pp. 1-45.

KTHIAR, F. G., & AL-HINDAWY, Z. A. (2022). The role of organizational creativity in achieving strategic superiority through knowledge sharing an exploratory study of the opinions of a sample of managers in the Kufa cement factory. International Journal of Professional Business Review, 7(5), e0869.

KUCKERTZ, A., & WAGNER, M. (2010). The influence of sustainability orientation on entrepreneurial intentions — Investigating the role of business experience. Journal of Business Venturing, 25(5), pp. 524-539.

KURUPPUGE, R. H., GREGAR, A., KUDLÁČEK, L., & JAYAWARDENA, C. (2018). Employees’ extrinsic motives and knowledge sharing: Intervening role of an intrinsic motive. CBU International Conference Proceedings, 6, pp. 282-287.

LAFORET, S. (2013). Organizational innovation outcomes in SMEs: Effects of age, size, and sector. Journal of World Business, 48(4), pp. 490-502.

LIN, H. (2007). Knowledge sharing and firm innovation capability: An empirical study. International Journal of Manpower, 28(3/4), pp. 315-332.

LAMB, C. W., HAIR, J. F., & MCDANIEL, C. (2001). Pemasaran, Salemba Empat, Jakarta

LARSEN, P., & LEWIS, A. (2007). How award-winning SMEs manage the barriers to innovation. Creativity and Innovation Management, 16(2), pp. 142-151.

MA’ATOOFI, A. R., & TAJEDDINI, K. (2010). The effect of entrepreneurship orientation on learning orientation and innovation: A study of small-sized business firms in Iran. International Journal of Trade, Economics and Finance, 1. pp. 254-260.

MAYASTINASARI, V., & SUSENO, B. (2023). The role of transformational leadership, and knowledge sharing on innovative work behavior of public organization in the Digital Era. International Journal of Professional Business Review, 8(7), e02977.

NASUTION, H. N., MAVONDO, F. T., MATANDA, M. J., & NDUBISI, N. O. (2011). Entrepreneurship: Its relationship with market orientation and learning orientation and as antecedents to innovation and customer value, Industrial Marketing Management, 40 (3), pp. 336-345.

NGUYEN, T.P.L., DOAN, X.H., TRAN, M.D., et al. (2019). Knowledge sharing and individual performance: The case of Vietnam. Uncertain Supply Chain Management, 7(3), pp. 483–494.

NGUYEN, T. H., & LE, A. N. (2019). Promoting creativity and innovation: Expected and unexpected consequences. Asia Pacific Journal of Innovation and Entrepreneurship, 13 (3), pp. 296-310.

NUSAIR, N., ABABNEH, R., & KYUNG BAE, Y. (2012). The impact of transformational leadership style on innovation as perceived by public employees in Jordan. International Journal of Commerce and Management, 22(3), pp. 182-201.

OSEI-BONSU, N. (2020). Entrepreneurial orientation and internationalization of SMEs – empirical evidence from developing markets. Journal of Management Research, 12(2), pp. 1-13.

PARASURAMAN, A., & ZINKHAN, G. M. (2002). Marketing to and serving customers through the internet: An overview and research agenda. Journal of the Academy of Marketing Science, 30(4), pp. 286-295.

PETERAF, M. A. (1993). The cornerstones of competitive advantage: A resource-based view. Strategic Management Journal, 14(3), pp. 179-191.

RAGHUVANSHI, J., & GARG, C. P. (2018). Time to get into the action. Asia Pacific Journal of Innovation and Entrepreneurship, 12(3), pp. 279-299.

RISNAWATI, N. (2018). Profiles of MSMEs, Problems, and Empowerment Efforts in Sumedang Regency. Coopetition of the IKOPIN Management Scientific journal, 9(1), pp. 13-29.

SARAGIH, S.P.T.I., & HARISNO, H. (2015). Influence of Knowledge Sharing and Information Technology Innovation on Employees Performance at Batamindo Industrial Park. Communication and Information Technology Journal, 9(2), pp. 45-49.

SHALLEY, C. E. (1991). Effects of productivity goals, creativity goals, and personal discretion on individual creativity. Journal of Applied Psychology, 76(2), pp. 179-185.

SLATER, S. F., & NARVER, J. C. (1994). Does competitive environment moderate the market orientation-performance relationship? Journal of Marketing, 58(1), pp. 46-55.

TAN, B. S., & THAI, V. V. (2014). Knowledge sharing within strategic alliance networks and its influence on firm performance: The liner shipping industry. International Journal of Shipping and Transport Logistics, 6(4), pp. 387-411.

TANG, Z., TANG, J., MARINO, L. D., et al. (2010). An investigation of entrepreneurial orientation and organisational strategies in Chinese SMEs. World Review of Entrepreneurship, Management and Sustainable Development, 6(3), pp. 206-223.

THERIOU, N., MADITINOS, D., and THERIOU, G. (2011). Knowledge Management Enabler Factors and Firm Performance: An Empirical Research of the Greek Medium and Large Firms. European Research Studies, XIV(2), pp. 97-134.

WANG, S., & NOE, R. A. (2010). Knowledge sharing: A review and directions for future research. Human Resource Management Review, 20(2), pp. 115-131.

WANG, Z., & WANG, N. (2012). Knowledge sharing, innovation, and firm performance, Expert Systems with Applications, 39(10), pp. 8899–8908.

WERNERFELT, B. (1995). The resource-based view of the firm: Ten years after. Strategic Management Journal, 16(3), pp. 171-174.

WOODMAN, R. W., SAWYER, J. E., & GRIFFIN, R. W. (1993). Toward a theory of organizational creativity. The Academy of Management Review, 18(2), pp. 293-321.

WU, W., YEH, R., & HUNG, H. (2012). Knowledge sharing and work performance: A network perspective. Social Behavior and Personality: an international journal, 40(7), pp. 1113-1120.

WANJIRU, A. (2022). Effect of knowledge management on firm performance and competitiveness. European Journal of Information and Knowledge Management, 1(1), pp. 1-10.

VOSS, G.B., & VOSS Z.G. (2000). Strategic Orientation and Firm Performance in an Artistic Environment. Journal of Marketing, 64. Pp. 67-83.

YEH, Y.-C., YEH, Y.-L., and CHEN, Y.-H. (2012). From knowledge sharing to knowledge creation: A blended knowledge-management model for improving university students’ creativity. Thinking Skills and Creativity, 7(3), pp. 245–257.


  • There are currently no refbacks.