Entrepreneurial Orientation, Innovation, Competitiveness, and Performance of Ultra-Micro and Micro Enterprises in Indonesia

Purpose: This study aims to verify the formation process of key success factors in ultra-micro and micro enterprises(UMEs) in developing countries, with a focus on Indonesia. It explores the relationships among entrepreneurial orientation, innovation, competitiveness, internationalization, business scale, and financial performance. Design/methodology/approach: Data from 403 UMEs in Indonesia's main handicraft centers were analyzed using AMOS Structural Equation Modeling (SEM) and model difference tests to examine mediation and moderation effects. Findings: Entrepreneurial orientation and innovation, particularly process innovation, significantly enhance UMEs' competitiveness and financial performance. Product and green innovation impact financial performance through competitiveness. Internationalization and business scale moderate the link between competitiveness and financial performance. Research limitations/implications: While the study focuses on craft UMEs, its findings may not apply to other industries. UMEs can improve financial performance by adopting process innovation, expanding business scale, and pursuing internationalization, while maintaining a strong domestic market base. Originality/value: This study provides empirical evidence on the connections between entrepreneurial orientation, innovation, competitiveness, and financial performance in Indonesian UMEs, highlighting the importance of innovation and capital investment for financial improvement.