The role of market uncertainty in fostering innovation and green supply chain management on the performance of tourism SMEs

Abstract

This research was conducted to examine the extent to which market uncertainty can encourage market players, especially SMEs, to exploit innovation and environmentally friendly orientation to improve their performance. From a supply chain perspective, market uncertainty, which in this study is proxied by the Covid-19 pandemic, has great potential to reduce performance and disrupt production and distribution lines as well as consumer demand. This encourages affected SMEs, such as SMEs that focus on providing tourism products, such as fashion and merchandise, to maintain their performance with product innovation, and minimize the use of non-environmentally friendly products. The object of research is Small and Medium Enterprise (SME) producing tourism souvenirs in Yogyakarta, Indonesia. Using the analysis technique of Structural Equation Modeling (SEM) with 150 respondents, the findings indicate that market uncertainty serves as a catalyst for SMEs to maintain performance through marketing innovation and product reorientation. Specifically, the results show that there is a positive and significant influence between innovation and green orientation on SME performance, and the mediating effect of market uncertainty to increase marketing innovation and environmentally friendly orientation. These findings theoretically contribute to explaining the relationship between supply chain management in the context of market uncertainty. In practical terms, this study confirms the need for support by stakeholders to support limited domestic tourism, according to health protocols, as well as digitalization of marketing for tourism SMEs.