Enhancing MSMEs Performance through Innovation: Evidence from East Java, Indonesia

Abstract

This study aims to determine the influence of knowledge management, financial Literacy, and technology orientation on the innovation capabilities and performance of halal-certified MSMEs in East Java, Indonesia. Innovation capabilities mediate the influence of knowledge management, financial Literacy, and technology orientation on MSME performance. The quantitative approach explores data by distributing questionnaires to 175 MSME owners certified halal in the Malang and Pasuruan areas. Based on the data analysis using PLS-SEM (Smart PLS 4), this research shows findings that emphasize the power of innovation capabilities in the relationship between knowledge management and financial Literacy as an antecedent to MSMEs' performance. Meanwhile, the influence of technology orientation on the innovation capability and performance of MSMEs is insignificant in improving MSMEs' performance. Knowledge resources must be acquired, shared, and applied to enhance product quality, production methods, and markets. Halal-oriented MSME owners should adopt new products and create new variants to maximize innovation. Additionally, to outperform rivals, Halal-oriented MSME owners must find ways to enhance the production process and begin implementing other MSME production processes. The findings of this study also contribute to the existing literature on knowledge management, financial Literacy, and technology orientation on MSMEs' performance.