Entrepreneurial Self-Efficacy, Innovative Behavior, and Business Performance Among MSEs in Central Java

Abstract

Background: Micro and Small Enterprises (MSEs) are central to Indonesia’s economy, yet many still struggle to transform entrepreneurial confidence into innovative actions that improve business performance.
Purpose: This study examines the effect of Entrepreneurial Self-Efficacy (ESE) on Business Performance (BP), with Innovative Work Behavior (IWB) as a mediator and Entrepreneur-Owned Fund (EOF) as a moderator.
Design/methodology/approach : A quantitative explanatory approach was applied to 125 MSE owners in the Solo Raya region. The data were analyzed using linear regression, mediation testing, and moderation testing.
Finding/Results: The results show that ESE positively affects IWB and BP, while IWB also positively affects BP. IWB partially mediates the relationship between ESE and BP. However, EOF does not moderate the relationship between ESE and IWB, indicating that internal financial resources do not necessarily strengthen the conversion of entrepreneurial confidence into innovative behavior.
Conclusion: The findings highlight that psychological capability and innovative behavior are more central to MSE performance than internal financial resources alone. MSE development policies should therefore integrate financial support with mentoring, entrepreneurial capability building, and innovation-oriented assistance.
Originality/value (State of the art): This study offers a nuanced view of EOF by showing that internal funds do not always serve as a moderating resource in the ESE–IWB relationship.

Keywords: business performance; entrepreneur-owned fund; entrepreneurial self-efficacy; innovative work behavior; micro and small enterprises