Entrepreneurial orientation, competencies, and access to finance in MSMEs: a PLS-SEM analysis of business innovation and performance

Abstract The present study assesses the implications of entrepreneurial orientation (EO), the availability of financial resources, and the entrepreneurial competencies on business innovation among Micro, Small, and Medium Enterprises (MSMEs) in an emerging economy framework and consequent, the performance of small businesses in terms of the resource-based perspective and dynamic capabilities perspective. In SmartPLS, partial least squares structural equation modeling was used to analyze survey data of 259 owner-managers of MSMEs. EO positively affects business innovation and performance of small businesses significantly and business innovation, in turn, positively affects business performance, which means that there is some mediation between EO and performance by business innovation. Entrepreneurial competencies positively affect performance, yet not business innovation within this sample; and finance has no significant effect on performance or innovation, implying that, in this instance, finance alone could not work without a solid entrepreneurial posture and competencies. The study should be based on a combination of EO and entrepreneurial competencies and financing schemes, and the innovation strategy and capability building as a priority of the policy-makers and support organizations rather than the credit expansion itself, which explains the relatively low contribution of these factors to the performance of small businesses.