Mediating effect of innovation capability between entrepreneurial resources and micro business performance

Abstract

Purpose This study aims to examine the effect of entrepreneurial resources on micro businesses and the mediating role of innovation capability in this relationship. Design/methodology/approach A structured questionnaire was used to gather data for this quantitative study, which adopted partial least squares structural equation modelling to test the hypotheses on a sample of 455 women entrepreneurs in Malaysia. Findings The results reveal that entrepreneurial resources, particularly technical resources, positively and significantly affect innovation capability and enhance business performance. Furthermore, innovation capability mediates the relationship between entrepreneurial resources and microbusiness performance. Research limitations/implications This study contributes theoretically by combining six entrepreneurial resources into a single framework in light of the resource-based view and finance-based theory. The results corroborate the effects of entrepreneurial resources on the performance of women’s micro businesses and the mediating role of innovation capability in this relationship. However, the cross-sectional design study limited this study’s ability to engage respondents in a more in-depth analysis of pertinent themes. Practical implications This research provides guidance and directions for business managers/owners and decision makers to adopt and improve entrepreneurial resources to achieve superior performance and competitive advantages. It presents evidence of innovation capability’s significant role in converting resources into innovative outcomes and creating value. Additionally, it is useful for policymakers to design development programmes for micro, small and medium enterprises (MSMEs) in emerging markets. Social implications This study highlights the value of innovation with a variety of entrepreneurial resources for women business owners that significantly impact Malaysian employment and gross domestic product and may have a positive social impact by enhancing social life in local communities. The nation’s unique context of multiracial and ethnic groups reflects Malaysia’s truly Asian ethnic composition. Originality/value This study fills the research gap by offering empirical evidence of the mediating role of innovation capability in the link between entrepreneurial resources and microbusiness performance, thus significantly contributing to emerging markets worldwide, where women-owned micro businesses are increasingly generating value and employment.