Government Policies and Firm Size as a Moderating Effect of Innovation on Business Performance

Abstract

Companies operating in this free market era have to be competitive. Companies need to be innovative in creating products and services and they have to be of high quality to withstand competition. Competitiveness is the ability of a company to overcome paradigm changes, market competition, enlarge and maintain profits, expand market share, and increase business scale. The stronger a company maintains its competitiveness, the more its value goes up in the market. This research was conducted on small and medium enterprises (SMEs) in Indonesia. The study's main objective is to examine if government policies and firm size play a role in moderating the effects of innovation on business performance. This research is based on survey data collected from 84 SMEs. Analysis was conducted using structural equation modeling and correlation analysis. The results of the study reveal that government policies and firm size have a moderating effect on innovation toward business performance.

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