Human capital and entrepreneurial performance: the mediating effect of entrepreneurial innovation in Indonesia

Abstract

Micro, Small, and Medium Enterprises (MSMEs) are pivotal to Indonesia’s economy, offering vast employment and significantly contributing to economic growth. However, the reinforcement of entrepreneurial roles remains underexplored, especially in the context of Indonesia’s vision to become "The Digital Energy of Asia" with an e-commerce boom. To address this, our study investigates the influence of human capital on entrepreneurial innovation and performance within the framework of Social Cognitive Theory. We scrutinized the multifaceted components of human capital—psychological, social, intellectual, and emotional—and their interplay with entrepreneurial innovation in enhancing MSME performance. Our research spans 587 Micro, Small, and Medium Enterprise (MSME) owners participating in Indonesia’s "Go Digital Training." We discover that not all human capital facets equally bolster entrepreneurial performance, highlighting entrepreneurial innovation behavior as a pivotal mediating factor. These insights provide a novel perspective for policymakers to bolster MSME performance, potentially catalyzing community economic advancement. This study contributes to the literature by dissecting the nuanced roles of human capital elements in the entrepreneurial ecosystem, a novel investigation in the context of Indonesian digital transformation.