Effect of Human Capital and Information Capital Readiness on Business Sustainability: Do Market Orientation and Business Performance Matter?

Abstract

COVID-19 pandemic has been threatening the sustainability of companies in Indonesia. Various policies and restrictions have caused a significant decline in sales and led to bankruptcy. As the major players in the national economy, the micro, small, medium enterprises (MSMEs) are encouraged to focus on their survival and sustainability. Survey method is done to examine the direct effect of human capital readiness and information capital readiness on business sustainability. It investigates whether the relationship is sequentially mediated by market orientation and business performance. Online questionnaires were distributed to 347 owners/managers of Indonesian manufacturing MSMEs in the East Java Province, Indonesia. PLS-SEM equation modeling was employed to test the hypotheses. Result shows that human capital readiness and information capital readiness positively affect business sustainability, and business performance does not mediate the effect of human capital readiness on business sustainability. Most important finding reveals that market orientation and business performance sequentially mediate the human capital readiness-business sustainability relationship. Market orientation and business performance sequentially mediate information capital readiness-business sustainability relationship. This study contributes to the development of resource-based view (RBV) by providing the empirical result on the important internal resources on sustainability. This brings practical awareness to the owners/managers of Indonesian MSMEs on increasing their market orientation to enhance their business performance and to guarantee their business sustainability. Practically, this research has important implications for achieving business sustainability as it offers a way for practitioners to improve business sustainability by utilizing human capital readiness, information capital readiness, market orientation, and business performance.