The Influence of Business Risk and Business Proactiveness Mediated by Competitive Advantage on SME Business Innovation in Surabaya After Pandemic Covid-19

Abstract

The dynamics of the economy after the COVID-19 pandemic have had a significant impact on the sustainability of Micro, Small, and Medium Enterprises (MSMEs) in Surabaya. This study aims to analyze the effect of business risk and business proactivity mediated by competitive advantage on MSME business innovation. This study uses primary data collected from 154 MSME respondents in Surabaya through questionnaires. Data analysis was carried out using the Structural Equation Modeling (SEM) method based on Partial Least Squares (PLS). The results of the study indicate that directly, competitive advantage has a significant positive effect on MSME business innovation. In addition, business proactivity also has a positive effect on competitive advantage, while business risk has a direct effect on business innovation. However, business proactivity does not show a significant direct effect on business innovation, and business risk does not have a significant effect on competitive advantage. The mediation analysis revealed that business risk mediated by competitive advantage does not have a significant effect on MSME business innovation. Conversely, business proactivity mediated by competitive advantage has a significant effect on MSME business innovation. These findings underscore the importance of competitive advantage as a key factor in driving innovation, especially through business proactivity. This study contributes to the literature on MSME innovation strategies by highlighting the role of competitive advantage as a mediator. The practical implication of this study is that MSMEs in Surabaya need to focus on developing competitive advantages and increasing proactive attitudes to encourage innovation and survive amidst the economic challenges post-COVID-19 pandemic.