Internal factors of entrepreneurial and business performance of small and medium enterprises (SMEs) in East Java, Indonesia

Abstract

The analysis conducted in this empirical study is the direct and indirect impact of internal entrepreneurial factors on the performance of small and medium enterprises. These factors were identified from previous studies from various countries, such as entrepreneurial-innovative work behavior, entrepreneurial leadership, entrepreneurial self-efficacy, and entrepreneurial motivation, by taking the research object of small-medium enterprise owners in Java. East, Indonesia. Descriptive statistics and structural equation models were used to analyze the research data. Samples were taken with uncontrolled quota sampling techniques. The research data was collected by distributing questionnaires online with the Google form application and offline. The total respondents were 575 small-medium enterprise owners. The test results showed that internal factors such as entrepreneurial self-efficacy, motivation, and leadership could increase business performance significantly.In contrast, entrepreneurial-innovative work behavior cannot significantly increase business performance. Other test results showed that: 1) entrepreneurial self-efficacy significantly improved entrepreneurial motivation; 2) entrepreneurial leadership significantly improved innovative entrepreneurial behavior; 3) entrepreneurial motivation partially mediated the influence of entrepreneurial self-efficacy on business performance; 4) innovative entrepreneurial behavior did not mediate the influence of entrepreneurial leadership on business performance. The contribution of the results of this study provides additional empirical studies on the role of entrepreneurial leadership, which significantly increases innovative entrepreneurial behavior. There is a lot of potential to develop business existence through entrepreneurial leadership through innovative behavior in entrepreneurship. Another contribution of this study is that entrepreneurial self-efficacy is a dominant predictor of business performance in SMEs and significantly increases entrepreneurial motivation. These findings reveal the importance of self-efficacy for SMEs because high self-efficacy for business actors is expected to increase entrepreneurial self-efficacy and teamwork motivation in helping to achieve business performance.

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