Managerial capability, market orientation, and business performance in coastal agribusiness SMEs: the mediating role of innovation capability in South Sulawesi, Indonesia
Abstract
Business performance in coastal agribusiness SMEs is increasingly challenged by environmental uncertainty, fluctuating market conditions, and limited organizational resources. While previous studies have highlighted the importance of organizational capabilities, limited attention has been given to how these capabilities are transformed into superior business performance through innovation capability, particularly in coastal agribusiness contexts. This study examines the relationships among managerial capability, market orientation, innovation capability, and business performance using a quantitative research design. Data were collected from 200 owners of coastal agribusiness SMEs in South Sulawesi, Indonesia, using purposive sampling and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that managerial capability ( β = 0.474, p < 0.001) and market orientation ( β = 0.218, p < 0.001) have positive and significant effects on innovation capability, with managerial capability demonstrating the stronger influence. Innovation capability also exerts the strongest direct effect on business performance ( β = 0.393, p < 0.001), while partially mediating the relationships between managerial capability, market orientation, and business performance. These findings suggest that organizational capabilities create business value not only through their direct contributions but also by strengthening firms’ ability to develop market-oriented innovations. This study extends the Resource-Based View and Dynamic Capabilities perspectives by demonstrating that innovation capability functions as a strategic mechanism linking organizational capabilities with business performance in coastal agribusiness SMEs. The findings further imply that sustainable competitiveness depends more on organizational adaptability and innovation than on the availability of natural resources alone.