The Influence of Financial Literacy and Entrepreneurial Orientation on the Performance of MSMEs in Indonesia with Business Innovation as a Mediating Variable
DOI:
https://doi.org/10.58812/wsjee.v3i03.2136Keywords:
Financial Literacy, Entrepreneurial Orientation, Business Innovation, MSME PerformanceAbstract
This study investigates the influence of financial literacy and entrepreneurial orientation on the performance of Micro, Small, and Medium Enterprises (MSMEs) in Indonesia, with business innovation acting as a mediating variable. A quantitative research design was employed, using data collected from 200 MSME owners and managers across diverse sectors through structured questionnaires based on a 5-point Likert scale. The data were analyzed using Structural Equation Modeling with Partial Least Squares (SEM-PLS 3.0). The results reveal that both financial literacy and entrepreneurial orientation have a positive and significant effect on MSME performance. Furthermore, business innovation significantly mediates the relationship between the two independent variables and business performance. These findings underscore the importance of financial capability, strategic entrepreneurial behavior, and innovation adoption in enhancing MSME sustainability and competitiveness. The study provides practical recommendations for policymakers and business development stakeholders to support integrated capacity-building efforts for MSMEs in Indonesia.
References
[1] H. Ratnaningtyas, H. Wicaksono, and I. Irfal, “Barriers and Opportunities for MSME Development in Indonesia: Internal and External Perspectives,” Int. J. Multidiscip. Approach Res. Sci., vol. 3, no. 01, pp. 163–170, 2025.
[2] M. Zulvikri, “Sinergi umkm dan ekonomi indonesia: Sebuah kajian komprehensif sebuah perspektif dan implikasi,” J. Manaj. Bisnis Era Digit., vol. 1, no. 2, pp. 255–265, 2024.
[3] A. Antoni and K. Karlin, “Pengaruh Inovasi Produk, Literasi Keuangan, dan Akses Pembiayaan terhadap Pertumbuhan UMKM di Indonesia,” J. Akunt. Dan Keuang. West Sci., vol. 3, no. 03, pp. 227–238, 2024, doi: 10.58812/jakws.v3i03.1599.
[4] D. Dwyanti, “The importance of financial literacy in financial management in micro, small and medium enterprises (msmes),” J. Appl. Manag. Bus., vol. 5, no. 1, pp. 1–6, 2024.
[5] B. Benardi, G. Yulianti, E. Kasih, and F. Qalbia, “The Role Of Financial Literacy On MSMEs: A Qualitative Investigation,” in Proceeding of The International Conference on Business and Economics, 2023, pp. 277–284.
[6] M. S. Eliza, S. Astuti, C. Safitri, and P. Ekonomi, “Pengaruh Literasi Finansial Terhadap Keberlangsungan Usaha Pada UMKM,” JPEK (Jurnal Pendidik. Ekon. dan Kewirausahaan), vol. 7, no. 2, pp. 398–408, 2023.
[7] U. Yuliati, F. Fitriasari, and M. Mergans, “The role of business innovation on the influence of entrepreneurship orientation on the performance of COVID-19 affected MSMES,” in Social and political issues on sustainable development in the post COVID-19 crisis, Routledge, 2022, pp. 276–284.
[8] D. E. Harmadji and U. Yudatama, “The Mediating Role of Innovation in Financial Literacy and Financial Performance: An Implementation in SMEs,” in Food Sustainability, Environmental Awareness, and Adaptation and Mitigation Strategies for Developing Countries, IGI Global Scientific Publishing, 2023, pp. 211–224.
[9] W. Khan et al., “The Effect of Entrepreneurial Orientation and Organisational Culture on Firm Performance: The Mediating Role of Innovation,” Int. J. Innov. Creat. Chang., vol. 13, pp. 652–677, Jun. 2020.
[10] F. Anwar, M. Meldona, Y. Yuliati, A. Alfarisyi, and Z. Saputra, “The Role Of Innovation In Mediating The Influence Of Entrepreneurial Characteristics And Orientation On Performance,” Int. J. Humanit. Educ. Soc. Sci., vol. 3, Dec. 2023, doi: 10.55227/ijhess.v2i3.642.
[11] I. Musthafa, H. Handra, N. Bachtiar, W. D. Taifur, and E. Ariyanto, “Financial literacy and performance of micro, small and medium enterprises: A literature review,” Marg. J. Manag. Account. Gen. Financ. Int. Econ. Issues, vol. 3, no. 1, pp. 287–303, 2023.
[12] H. Ali, E. N. Omar, H. A. Nasir, and M. R. Osman, “Financial literacy of entrepreneurs in the small and medium enterprises,” in Proceedings of the 2nd Advances in Business Research International Conference: ABRIC2016, Springer, 2017, pp. 31–38.
[13] W. K. Dewi and R. W. EDT, “Pengaruh Literasi Keuangan terhadap Pengelolaan Keuangan Usaha Mikro Kecil dan Menengah,” Target J. Manaj. Bisnis, vol. 5, no. 2, pp. 179–186, 2023.
[14] B. Franz, “Revisiting entrepreneurial orientation and its contributions to business performance: An industry type comparison employing computer-aided text analysis under consideration of configurational, contingency, environmental, and temporal aspects,” 2019, Durham University.
[15] T. J. Putniņš and A. Sauka, “Why does entrepreneurial orientation affect company performance?,” Strateg. Entrep. J., vol. 14, no. 4, pp. 711–735, 2020.
[16] A. Delhi, E. Sana, A. A. Bisty, and A. Husain, “Innovation in Business Management Exploring the Path to Competitive Excellence,” APTISI Trans. Manag., vol. 8, no. 1, pp. 58–65, 2024.
[17] S. Kantun et al., “Business Innovation for Micro, Small and Medium Enterprises in Jember,” Briliant J. Ris. dan Konseptual, vol. 7, p. 653, Aug. 2022, doi: 10.28926/briliant.v7i3.1020.
[18] E. Timotius, “THE ROLE OF INNOVATION IN BuSINESS STRATEGY AS A COMPETITIVE ADVANTAGE: EVIDENCE FROM INDONESIAN MSMES,” 2023.
[19] A. O. Ayandibu, M. F. Vezi-Magigaba, and I. Kaseeram, “Innovation as an improvement tool for SMMEs,” in Reshaping Entrepreneurship Education With Strategy and Innovation, IGI Global Scientific Publishing, 2021, pp. 78–107.
[20] N. Indawati, F. A. Efendi, and M. A. Wildan, “Implementasi Sistem Manajemen Kinerja yang Efektif dan Efisien dalam Organisasi,” MES Manag. J., vol. 3, no. 3, pp. 706–711, 2024.
[21] A.-M. Grigore, C. Bâgu, and C. Radu, “„Developing performance indicators for business improvement”,” Analele Univ. ii din Oradea-ùtiine Econ. anul XVIII, Vol. IV, pp. 270–275, 2009.
[22] J. Muraba, M. K. Mamogobo, and B. Thango, “The Balanced Scorecard Methodology: Performance Metrics and Strategy Execution in SMEs: A Systematic Review,” Available SSRN 4996929, 2024.
[23] D. Dahliana, “Pendekatan Balanced Scorecard dalam Mengukur Kinerja Baitul Mal wa Tamwil Amanah Kota Banjarmasin,” Al-Iqtishadiyah Ekon. Syariah Dan Huk. Ekon. Syariah, vol. 7, no. 1, pp. 1–16, 2022.
[24] P. Hall, “Measuring SME performance,” Manuf. Eng., vol. 81, no. 3, pp. 113–115, 2002.
[25] G. T. Lumpkin and G. G. Dess, “Clarifying the entrepreneurial orientation construct and linking it to performance,” Acad. Manag. Rev., vol. 21, no. 1, pp. 135–172, 1996.
[26] F. Damanpour, “Organizational innovation: A meta-analysis of effects of determinants and moderators,” Acad. Manag. J., vol. 34, no. 3, pp. 555–590, 1991.
[27] R. J. Calantone, S. T. Cavusgil, and Y. Zhao, “Learning orientation, firm innovation capability, and firm performance,” Ind. Mark. Manag., vol. 31, no. 6, pp. 515–524, 2002.
[28] S. R. Ulfiany, H. Pusparini, and N. Nurabiah, “Analisis Pengaruh Tingkat Literasi Keuangan Terhadap Pengelolaan Keuangan Pada Pelaku Umkm Di Gunungsari,” J. Ris. Mhs. Akunt., vol. 3, no. 3, pp. 59–67, 2023.
[29] M. Selvi, S. Sivasubramanian, and P. Sathish, “Identification of fatigue using data analytics and machine learning to improve worker’s health,” in 2024 International Conference on Cognitive Robotics and Intelligent Systems (ICC-ROBINS), IEEE, 2024, pp. 442–447.
[30] R. Kusumawati, M. M. Hanafi, and A. Surwanti, “Why People Intent to Use P2P Lending? A Systematic Literature Review,” J. Manag. World, vol. 2024, no. 4, pp. 797–806, 2024.
[31] J. Wiklund and D. Shepherd, “Entrepreneurial orientation and small business performance: a configurational approach,” J. Bus. Ventur., vol. 20, no. 1, pp. 71–91, 2005.
[32] S.-K. Choi, S. Han, and K.-T. Kwak, “Innovation capabilities and the performance of start-ups in korea: the role of government support policies,” Sustainability, vol. 13, no. 11, p. 6009, 2021.
[33] S. Sarsiti and E. Minarni, “Entrepreneurial Orientation (EO) and Performance Among Micro, Small and Medium Enterprises (MSMEs)(From an RBV Perspective),” J. Ilmu Ekon. dan Manajemen. Retrieved from http//jurnal. untag-sby. ac. id/index. php/die/index, 2024.
[34] L. Josien, “Entrepreneurial orientation: An empirical study of the risk-propensity dimension of entrepreneurs,” Acad. Entrep. J., vol. 18, no. 1, p. 21, 2012.
[35] H. S. Rathod, T. Dixit, M. Huda, and A. Maseleno, “Market innovations driving competitive advantage in MSMEs: An extensive literature review,” Int. J. Health Sci. (Qassim)., no. III, pp. 6457–6469, 2022.
[36] I. E. N. Okoli, C. P. Moneme, and N. I. Adani, “Innovative practices and competitive advantage among SMEs: An empirical review,” 2024.
[37] A. Susetyo, S. Suliyanto, D. Susilowati, E. Herwiyanti, and P. Lestari, “Sistem Informasi Akuntansi Manajemen, Orientasi Pasar dan Kinerja UMKM: Peran Mediasi Kemampuan Inovasi,” Own. Ris. dan J. Akunt., vol. 8, no. 3, pp. 3018–3027, 2024.
[38] S. Kalathingal and S. K. Ambrammal, “Innovation capabilities and sustainability in MSMEs. An analysis of empirical studies,” Int. J. Entrep. Innov., p. 14657503241307140, 2025.
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Nanang Qosim
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Facebook 
Instagram 
Twitter 
Youtube 
westscience.journals@gmail.com