The role of innovation capability in mediation of COVID-19 risk perception and entrepreneurship orientation to business performance

Abstract

The purpose of this study is to explain how innovation capability influences business performance by mediating the effect of Covid-19 risk perception and entrepreneurial orientation. This study's population consists of MSMEs in Bali's tourism and creative industries. Purposive sampling was utilized to choose 90 managers of MSMEs in the tourist and creative economy sectors. Path Analysis with SEM-PLS was employed as the analytical approach. The findings revealed that the COVID-19 Risk Perception had a negative and significant impact on business performance, but the Entrepreneurship Orientation had a positive and significant impact. Furthermore, COVID-19 Risk Perception had a negative and significant impact on Innovation Capability; while the Entrepreneurship Orientation had a positive and significant effect on Innovation Capability; and Innovation Capability had a positive and significant impact on business performance. In addition, Innovation Capability was able to mediate the influence of COVID-19 Risk Perception and Entrepreneurship Orientation on business performance. Therefore, it is important for MSMEs in the tourism and creative economy sectors in Bali to improve their Entrepreneurship Orientation so that they are able to build higher innovation capabilities in order to improve business performance in facing the risks of the COVID-19 pandemic.