The Mediating Effect of Innovation in Between Strategic Orientation and Enterprise Performance: Evidence From Malaysian Manufacturing Small-to-Medium-Sized Enterprises

Abstract

Strategic orientation and innovation are vital determinants for accelerating the performance of small-to-medium-sized enterprises (SMEs). However, there is a lack of empirical evidence confirming the innovation at the product and process levels that instigated the SMEs’ performance. Moreover, the mediating effect of process and product innovation can play a significant role in strategic orientation and manufacturing SMEs’ performance. In this respect, this study aims to examine the mediating effect of product and process innovation between strategic orientation (i.e., market, entrepreneurial, and customer orientation) and the performance of Malaysian manufacturing SMEs. The questionnaire survey gathered data from 360 manufacturing SMEs and was analyzed using partial least square structural equation modeling (PLS-SEM) to achieve these research objectives. The study analysis established that customer and entrepreneurial orientation significantly influence product and service innovation. However, the market orientation is significant for process innovation but insignificant for product-level innovation among SMEs. The study’s consequences exposed that process innovation has significantly mediated between the strategic (market, customer, and entrepreneurial) orientation and SMEs performance. It implies that market, entrepreneurial, and customer-related strategies would substantially improve SMEs’ performance by harnessing innovation at product and process levels. The core insights provided by the current work are to strengthen the strategic orientation that can promote product and process innovation, thereby harnessing the SMEs’ performance. Additionally, the study’s significance and limitations were reported at the end.

Entrepreneurship and Innovation: An Empirical Study in Agro-industry

“…The study of innovation and how it affects firm performance has been an interesting research topic for scholars [16]. The relationship between product innovation and firm performance is positive from the previous study [16].…”

“…The study of innovation and how it affects firm performance has been an interesting research topic for scholars [16]. The relationship between product innovation and firm performance is positive from the previous study [16]. Another study also researches more specific variable, such as green product innovation and how it can be helpful for the company [17].…”

Pengaruh Pengelolaan Risiko Dan Perilaku Inovatif Terhadap Keberlangsungan Usaha Umkm Yang Dimoderasi Oleh Kapabilitas Jejaring

“…Di satu sisi, inovasi memberikan perusahaan kesempatan untuk membedakan diri dari pesaing (Dereli, 2015) dan memperoleh keuntungan yang lebih baik Linton & Kask, 2017). Memang, inovasi memungkinkan perusahaan untuk mengatasi permintaan pelanggan yang berubah dan dengan demikian mencapai kinerja yang unggul (Hajar et al, 2022;Al Mamun et al, 2022;Iqbal et al, 2021;Brannon & Wiklund, 2016). Di sisi lain, inovasi dapat berdampak negatif bagi UKM karena mereka sering kekurangan sumber daya, kemampuan, dan pengalaman dalam melakukan kegiatan inovasi (Safrianti et al, 2021;Adam & Alarifi, 2021) Dengan demikian, mengejar tingkat inovasi yang tinggi dapat "mengkompromikan kemampuan UKM untuk memenuhi kewajiban keuangan jangka pendek" karena investasi di muka yang diperlukan untuk mengembangkan kemampuan inovasi spesifik perusahaan (Hermundsdottir & Aspelund, 2021;Kuncoro & Suriani, 2018) .…”

Understanding the role of customer incivility and supervisor monitoring in the relationship between customer orientation and frontline employees' emotional exhaustion

“…Moreover, recent studies have noted similar positive effects at the organizational level. Customer orientation can increase organizational performance (Al Mamun et al. , 2022; Lin et al.…”

“…Moreover, recent studies have noted similar positive effects at the organizational level. Customer orientation can increase organizational performance (Al Mamun et al, 2022;Lin et al, 2019) and organizational creativity (Park and Cho, 2022). Because customer orientation can attract customers and improve employees' working motivation, it is a direction for the enterprise to gain competitiveness.…”