Frans Sudirjo, Moh. Zaini, Basuki Toto Rahmanto, Sri Juminawati

The Influence of Managerial Competence, Innovation, and Market Orientation on the Performance of Micro, Small and Medium Enterprises (MSMEs)

Introduction

The influence of managerial competence, innovation, and market orientation on the performance of micro, small and medium enterprises (msmes). Explore how managerial competence, innovation, and market orientation significantly influence MSME performance in Indonesia. Discover key drivers for strategic leadership and sustainable business growth.

Abstract

This study investigates the impact of managerial competence, innovation, and market orientation on the performance of Micro, Small, and Medium Enterprises (MSMEs) in Indonesia. Using a quantitative approach, data were collected from 220 MSMEs and analyzed through Structural Equation Modeling-Partial Least Squares (SEM-PLS). The findings reveal that all three constructs significantly and positively influence MSME performance, with managerial competence demonstrating the strongest effect. Innovation fosters adaptability and competitive advantage, while market orientation enhances customer focus and market responsiveness. The results underscore the importance of strategic leadership, innovative practices, and a market-driven approach in improving MSME performance. These insights provide practical recommendations for MSME stakeholders and policymakers to drive sustainable growth and competitiveness in the sector.

Review

This study presents a timely and relevant investigation into critical drivers of Micro, Small and Medium Enterprises (MSMEs) performance, specifically focusing on the Indonesian context. The research addresses a significant area by examining the combined influence of managerial competence, innovation, and market orientation, all of which are widely acknowledged as crucial for business success, particularly within the often resource-constrained MSME sector. The clear objective and the focus on an important economic segment contribute positively to the body of literature on entrepreneurship and small business management, offering valuable insights into factors that can foster growth and competitiveness. Methodologically, the study employs a robust quantitative approach, utilizing Structural Equation Modeling-Partial Least Squares (SEM-PLS) on data collected from 220 MSMEs, which provides a strong foundation for the statistical analysis. The findings are compelling, demonstrating a significant and positive impact of all three hypothesized constructs on MSME performance. Notably, managerial competence emerges as the most influential factor, underscoring the indispensable role of effective leadership. The abstract also effectively highlights how innovation drives adaptability and competitive advantage, while market orientation cultivates customer focus and responsiveness, thereby enriching our understanding of their specific mechanisms of influence. The practical implications drawn from this research are substantial, offering actionable recommendations for MSME stakeholders and policymakers. The emphasis on strategic leadership, innovative practices, and a market-driven approach provides a clear roadmap for intervention strategies aimed at enhancing MSME performance and achieving sustainable growth and competitiveness. This study significantly contributes to the practical understanding of MSME dynamics and serves as a valuable resource for developing targeted support programs. Future research could potentially explore mediating or moderating variables within these relationships or delve into specific sub-sectors of MSMEs for more granular insights, building upon this strong foundational analysis.

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