Proceedings of The 2nd International Conference on Research in Management and Economics
Effect of Entrepreneurial Orientation and Innovation on Business Performance: An empirical study on Indonesia Creative Industry Sector
Ananda Sabil Hussein
Creative sector is one of growing sector in Indonesia. It contributes around 8% of Indonesia national income. Small and Medium Enterprises (SMEs) are the major player in this sector.As there is a need to investigate the determinants of SMEs business performance in the area of Indonesian creative economy sector, this study aims to determine the predictors of SMEs business performance. Furthermore, to have a better knowledge about the relationship between entrepreneurial orientation and business performance, this study tested the mediating effect of both exploratory and exploitative innovation. One hundred and twenty-five SME’s owners participated in this study. Data was collected in Malang city, East-Java province, Indonesia. Partial Least Square was employed in this study. The results of outer model explained that the measures used are valid and reliable. The findings of structural model evaluation indicated that the proposed model was robust, hence hypothesis test might be proceeded. In answering research objectives, three hypotheses were proposed. The statistical test showed that entrepreneurial orientation does not have a direct significant effect on business performance. While it does not have a direct effect, this study showed that entrepreneurial orientation has an indirect effect on business performance through exploitative innovation. This finding theoretically shows that in affecting business performance, individual entrepreneurial orientation should be mediated by exploitative innovation. Practically, it suggested that creative economy practitioners must be able to exploit the resources owned by the business organization in creating innovation as it will increase the business performance.
Keywords: Entrepreneurial Orientation; Exploratory Innovation; Exploitative Innovation; Business Performance; Creative Economy.