Entrepreneurial orientation in Indonesian SMEs

Abstract

This study explores the influence of Entrepreneurial Orientation (EO) dimensions on the performance of Micro, Small, and Medium Enterprises (MSMEs) in economically affected regions of Indonesia. Using PLS-SEM analysis, data from 1,161 MSMEs across West Java, Central Java, East Java, and South Sulawesi were analyzed to assess the effects of innovativeness, risk-taking, proactiveness, and strategic networking on business performance. Findings reveal that while innovativeness, risk-taking, and strategic networking positively impact business performance, proactiveness showed a surprising negative influence. This suggests challenges in cultivating proactive behaviours among MSME owners, who struggle with effectively identifying and leveraging new business opportunities. Additionally, factors such as education and age positively affect EO, whereas business experience and family background do not show a significant impact, reflecting a trend among necessity-driven, first-generation entrepreneurs in Indonesia. The study highlights the need for targeted government support, including entrepreneurship training, business incubation, networking opportunities, and technology adoption incentives, to bolster MSME resilience and growth. These findings contribute to strategic policy development to improve Indonesia’s entrepreneurial landscape, particularly in the post-COVID-19 era.

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