Turning Market Orientation into MSME Performance: Does Innovativeness Matter?
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Abstract
Micro, small, and medium enterprises (MSMEs) constitute a cornerstone of Indonesia’s economy; however, maintaining their business performance continues to pose a persistent challenge. Although prior studies have consistently highlighted the strategic importance of market orientation in enhancing business performance, the underlying mechanisms through which this orientation is translated into tangible outcomes remain insufficiently understood, particularly with regard to the mediating role of innovativeness. To address this gap, the present study examines the relationships between market orientation, innovativeness, and MSMEs’ business performance. Data were collected through structured questionnaires administered to MSME owners and managers who are actively engaged in innovation-related activities, yielding 159 valid responses for analysis using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that the dimensions of market orientation do not contribute uniformly to MSMEs’ innovativeness. More importantly, innovativeness emerges as a key mechanism that helps convert most market-oriented practices into superior business performance. These insights enrich market orientation theory while offering practical guidance for MSME owners and managers seeking to strengthen performance through market-driven innovation. In light of existing literature, this study represents one of the early empirical efforts to demonstrate the mediating role of innovativeness in the relationship between market orientation and MSME performance.
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