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