ENTREPRENEURIAL ORIENTATION, ENVIRONMENTALADAPTABILITY, AND MSME BUSINESS PERFORMANCE: THEMEDIATING ROLE OF BUSINESS MODEL INNOVATION
Main Article Content
Abstract
Entrepreneurial orientation and environmental adaptability have been widely
recognized as important determinants of Micro, Small, and Medium Enterprise
(MSME) performance. However, previous empirical studies have reported
inconsistent findings regarding the structural relationships among
entrepreneurial orientation, environmental adaptability, business model
innovation, and business performance. Therefore, this study aims to synthesize
empirical evidence and develop a conceptual framework explaining the
mediating role of business model innovation in the relationship between
entrepreneurial orientation, environmental adaptability, and MSME business
performance. This study employed a quantitative literature review approach by
systematically reviewing empirical studies published between 2015 and 2026,
with a primary emphasis on research applying Structural Equation Modeling–
Partial Least Squares (SEM-PLS). The findings reveal that entrepreneurial
orientation and environmental adaptability significantly promote business model
innovation, which subsequently enhances MSME business performance.
Business model innovation functions as a strategic mechanism that transforms
entrepreneurial capabilities into sustainable competitive performance. The study
integrates Entrepreneurial Orientation Theory, Dynamic Capability Theory, and
the Resource-Based View (RBV) to provide a comprehensive theoretical
explanation of the relationships among the variables. Practically, the findings
highlight the importance of strengthening entrepreneurial capabilities, adaptive
capacity, and business model innovation to improve the long-term
competitiveness and sustainability of MSMEs.
Downloads
Article Details
Section
How to Cite
References
Agostini, M., & Van Zomeren, M. (2021). Toward a comprehensive and potentially cross-cultural model of why people engage in collective action: A quantitative research synthesis of four motivations and structural constraints. Psychological Bulletin, 147(7), 667. https://doi.org/10.1037/bul0000256
Akomea, S. Y., Agyapong, A., Ampah, G., & Osei, H. V. (2023). Entrepreneurial orientation, sustainability practices and performance of small and medium enterprises: evidence from an emerging economy. International Journal of Productivity and Performance Management, 72(9), 2629-2653. https://doi.org/10.1108/IJPPM-06-2021-0325
Anwar, M., & Shah, S. Z. A. (2021). Entrepreneurial orientation and generic competitive strategies for emerging SMEs: Financial and nonfinancial performance perspective. Journal of Public Affairs, 21(1), e2125. https://doi.org/10.1002/pa.2125
Asad, M., Hafeez, M. H., Saleem, I., Asif, M. U., Sulaiman, M. A. B. A., & Awain, A. M. B. (2025). Product innovation: a mediator between entrepreneurial orientation, knowledge management, and performance of SMEs. Journal of the Knowledge Economy, 16(4), 15381-15403. https://doi.org/10.1007/s13132-024-02465-z
Bari, N., Chimhundu, R., & Chan, K.-C. (2022). Dynamic capabilities to achieve corporate sustainability: a roadmap to sustained competitive advantage. Sustainability, 14(3), 1531. https://doi.org/10.3390/su14031531
Basit, A., Wang, L., Javed, A., Shoaib, M., & Aslam, M. U. (2025). Impact of digital technologies on manufacturing firm resilience during COVID-19 pandemic: a PLS-SEM and artificial neural network analysis. Journal of Manufacturing Technology Management, 36(2), 358-384. https://doi.org/10.1108/JMTM-08-2024-0421
Cavusgil, S. T., & Deligonul, S. Z. (2025). Dynamic capabilities framework and its transformative contributions. Journal of International Business Studies, 56(1), 33-42. https://doi.org/10.1057/s41267-024-00758-8
Elgarhy, S. D., & Abou-Shouk, M. (2023). Effects of entrepreneurial orientation, marketing, and innovation capabilities, on market performance: The mediating effect of sustainable competitive advantage. International Journal of Contemporary Hospitality Management, 35(6), 1986-2004. https://doi.org/10.1108/IJCHM-04-2022-0508
Ferreira, J. J. M., Fernandes, C. I., & Veiga, P. M. (2024). The effects of knowledge spillovers, digital capabilities, and innovation on firm performance: a moderated mediation model. Technological Forecasting and Social Change, 200, 123086. https://doi.org/10.1016/j.techfore.2023.123086
Filser, M., Kraus, S., Breier, M., Nenova, I., & Puumalainen, K. (2021). Business model innovation: Identifying foundations and trajectories. Business Strategy and the Environment, 30(2), 891-907. https://doi.org/10.1002/bse.2660
Freudenreich, B., Lüdeke-Freund, F., & Schaltegger, S. (2020). A stakeholder theory perspective on business models: Value creation for sustainability. Journal of Business Ethics, 166(1), 3-18. https://doi.org/10.1007/s10551-019-04112-z
Gölgeci, I., Arslan, A., Dikova, D., & Gligor, D. M. (2020). Resilient agility in volatile economies: institutional and organizational antecedents. Journal of Organizational Change Management, 33(1), 100-113. https://doi.org/10.1108/JOCM-02-2019-0033
Kero, C. A., & Bogale, A. T. (2023). A Systematic Review of Resource-Based View and Dynamic Capabilities of Firms and Future Research Avenues. International Journal of Sustainable Development & Planning, 18(10). https://doi.org/10.18280/ijsdp.181016
Latifi, M.-A., Nikou, S., & Bouwman, H. (2021). Business model innovation and firm performance: Exploring causal mechanisms in SMEs. Technovation, 107, 102274. https://doi.org/10.1016/j.technovation.2021.102274
Li, M., Hu, J., Liu, P., & Chen, J. (2023). How can digital finance boost enterprises' high-quality development?: evidence from China. Environmental Science and Pollution Research, 30(38), 88876-88890. https://doi.org/10.1007/s11356-023-28519-4
Li, Y., Cui, L., Wu, L., Lowry, P. B., Kumar, A., & Tan, K. H. (2024). Digitalization and network capability as enablers of business model innovation and sustainability performance: The moderating effect of environmental dynamism. Journal of Information Technology, 39(4), 687-715. https://doi.org/10.1177/02683962231219513
Lumpkin, G. T., & Dess, G. G. (2001). Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle. Journal of Business Venturing, 16(5), 429-451. https://doi.org/10.1016/S0883-9026(00)00048-3
Makhloufi, L., Laghouag, A. A., Meirun, T., & Belaid, F. (2022). Impact of green entrepreneurship orientation on environmental performance: The natural resource‐based view and environmental policy perspective. Business Strategy and the Environment, 31(1), 425-444. https://doi.org/10.1002/bse.2902
Mathafena, R. B., & Msimango-Galawe, J. (2023). Entrepreneurial orientation, market orientation and opportunity exploitation in driving business performance: moderating effect of interfunctional coordination. Journal of Entrepreneurship in Emerging Economies, 15(3), 538-565. https://doi.org/10.1108/JEEE-03-2021-0114
Oprean-Stan, C., Oncioiu, I., Iuga, I. C., & Stan, S. (2020). Impact of sustainability reporting and inadequate management of ESG factors on corporate performance and sustainable growth. Sustainability, 12(20), 8536. https://doi.org/10.3390/su12208536
Ortiz‐Avram, D., Ovcharova, N., & Engelmann, A. (2024). Dynamic capabilities for sustainability: Toward a typology based on dimensions of sustainability‐oriented innovation and stakeholder integration. Business Strategy and the Environment, 33(4), 2969-3004. https://doi.org/10.1002/bse.3630
Pulka, B. M., Ramli, A., & Mohamad, A. (2021). Entrepreneurial competencies, entrepreneurial orientation, entrepreneurial network, government business support and SMEs performance. The moderating role of the external environment. Journal of Small Business and Enterprise Development, 28(4), 586-618. https://doi.org/10.1108/JSBED-12-2018-0390
Raschke, R. L. (2010). Process-based view of agility: The value contribution of IT and the effects on process outcomes. International Journal of Accounting Information Systems, 11(4), 297-313. https://doi.org/10.1016/j.accinf.2010.09.005
Reshi, Z. M., Saqib, N., & Nazir, H. (2025). Entrepreneurial orientation: a systematic literature review and future research. Journal of Management History, 1-34. https://doi.org/10.1108/JMH-10-2024-0167
Saemaldaher, K., & Emeagwali, O. L. (2025). The role of open innovation in enhancing organizational resilience and sustainability performance through organizational adaptability. Sustainability, 17(13), 5846. https://doi.org/10.3390/su17135846
Sarfo, C., Fakhar Manesh, M., & Caputo, A. (2025). Exploitative and exploratory search: dynamic capabilities enhancing SME adaptation, new product development, and environmental performance. Journal of Small Business Management, 63(5), 1978-2007. https://doi.org/10.1080/00472778.2024.2418026
Setiawan, B., Pamungkas, B., Mekaniwati, A., & Kusuma, P. M. (2025). The strategic role of digital transformation, dynamic and agile capabilities for the performance of micro, small, and medium enterprises (MSMEs). The Bottom Line. https://doi.org/10.1108/BL-08-2024-0120
Settembre-Blundo, D., González-Sánchez, R., Medina-Salgado, S., & García-Muiña, F. E. (2021). Flexibility and resilience in corporate decision making: a new sustainability-based risk management system in uncertain times. Global Journal of Flexible Systems Management, 22(Suppl 2), 107-132. https://doi.org/10.1007/s40171-021-00277-7
Soares, M. do C., & Perin, M. G. (2020). Entrepreneurial orientation and firm performance: an updated meta-analysis. RAUSP Management Journal, 55(2), 143-159. https://doi.org/10.1108/RAUSP-01-2019-0014
Suder, M., Kusa, R., Duda, J., & Karpacz, J. (2025). Exploring impact of entrepreneurial orientation on firm performance-moderators' variability under changing market conditions. Review of Managerial Science, 19(3), 797-842. https://doi.org/10.1007/s11846-024-00775-9
Tsai, K., Huang, C., & Chen, Z. (2020). Understanding variation in the relationship between environmental management practices and firm performance across studies: A meta‐analytic review. Business Strategy and the Environment, 29(2), 547-565. https://doi.org/10.1002/bse.2386
Tshikovhi, N., More, K., & Cele, Z. (2023). Driving sustainable growth for small and medium enterprises in emerging urban-rural economies. Sustainability, 15(21), 15337. https://doi.org/10.3390/su152115337
Walter, A.-T. (2021). Organizational agility: ill-defined and somewhat confusing? A systematic literature review and conceptualization. Management Review Quarterly, 71(2), 343-391. https://doi.org/10.1007/s11301-020-00186-6