The effect of market orientation as a mediating variable in the relationship between entrepreneurial orientation and SMEs performance

Abstract

Purpose – This study aims to examine the effect of market orientation (MO) as a mediating variable in the relationship between entrepreneurial orientation (EO) and small and medium enterprises (SMEs)’ performance. Design/methodology/approach – A total of 500 SMEs in the manufacturing industry of food and beverages were involved in this study with a response rate of 117. Data collection was conducted in all states of Peninsular Malaysia including the northern, central, southern and eastern regions. Findings – The findings show that EO has a significant relationship with MO, and MO has a significant relationship with SME performance. MO will mediate the relationship between EO and SMEs’ performance. Practical implications – The higher the EO implemented in a business, the more willing a company will be to implement MO. This analysis shows that highly entrepreneurial firms tend to be highly market orientated and this affects SMEs’ performance. Originality/value – The results of this study show that the characteristic of entrepreneurial and MO practiced by SMEs in Malaysia has been significantly affected the SMEs’ performance. It indicates that EO offers a holistic and systematic model for supporting SMEs to build a well-maintained environment of MO and SMEs’ performance.