The Effect of Business Capital on Business Performance with Product Innovation as a Mediating Variable in Kendari City Micro Businesses

Kendari City''s micro-enterprises struggle with limited capital and low product innovation, with 60% facing difficulties accessing capital. This study aims to examine the relationship between business capital and micro-enterprises'' performance, with product innovation strengthening this relationship. Policy support is crucial for improving competitiveness and sustainability. This study investigates the effect of business capital on business performance in micro enterprises in Kendari City, focusing on product innovation as a moderating variable. Data was collected from 50 respondents using the Slovin formula and Structural Equation Modeling (SEM) method. The study validated and tested the data for reliability and validity, providing an overview of the relationship between business capital and performance. Business capital significantly influences business performance, product innovation, and overall performance. Its Path Coefficient is 0.011, with a T-Statistic value of 9.875, above the threshold of Z α 0.05. Product innovation also positively influences business performance, with a Path Coefficient of 0.004 and a T-Statistic value of 2.855. Business capital''s influence on product innovation is fairly large, exceeding the threshold. Business capital significantly impacts the performance of Micro, Small, and Medium Enterprises (MSMEs) in Kendari City, enhancing product innovation, competitiveness, and market competitiveness. A synergistic strategy utilizing sufficient capital fosters innovative capabilities, resulting in improved performance.