Innovation Practices and Business Performance of Home-Grown Enterprises: The Mediating Effect of Access to External Support

Abstract. Small and homegrown businesses contribute significantly to local economic development; however, limited empirical evidence explains how external support mechanisms influence the relationship between innovation practices and business performance. Addressing this gap, this study examined the relationship between innovation practices and business performance among homegrown businesses in Davao City, with external support serving as a mediating variable. The study employed a quantitative descriptive-correlational research design involving 300 business owners and managers selected through an appropriate sampling procedure. Data were collected using a structured questionnaire that measured innovation practices, external support, and business performance. Descriptive statistics, correlation analysis, and mediation analysis were performed to determine the relationships among the variables and to examine the mediating effect of external support. The findings revealed that respondents demonstrated high levels of innovation practices, particularly in operational efficiency, knowledge integration, and continuous product improvement. External support was generally perceived as high, especially in terms of government policy support, although financial access and commercialization support remained comparatively limited. Innovation practices significantly influenced business performance both directly and indirectly through external support. Mediation analysis confirmed that external support partially mediated the relationship between innovation practices and business performance, with innovation practices exerting a significant positive effect on external support, which in turn significantly enhanced business performance (β = 0.500, p < 0.001). These findings demonstrate that while innovation practices directly contribute to improved business performance, their effectiveness is strengthened by accessible external support systems. The study contributes to the understanding of innovation-driven business performance by providing empirical evidence that integrating internal innovation capabilities with external support mechanisms is essential for enhancing the competitiveness and sustainable growth of homegrown businesses. Keywords: Business Performance; External Support; Homegrown Businesses; Innovation Practices; Mediation Analysis