Digital Entrepreneurship and Market Orientation as Strategic Capabilities for Enhancing Innovation Performance among Small and Medium Enterprises

Abstract

Small and medium-sized enterprises (SMEs) operate in an increasingly dynamic environment characterized by digital disruption, changing customer preferences, and intensified competition. These conditions require SMEs to develop strategic capabilities that support continuous innovation and market responsiveness. This study examines the effects of digital entrepreneurship and market orientation on SME innovation performance. A quantitative explanatory design was employed, involving owners and managers who participated directly in strategic decision-making. Respondents were selected through purposive sampling, and data were collected using a five-point Likert-scale questionnaire. The data were analyzed using Partial Least Squares Structural Equation Modeling, including measurement-model evaluation, structural-model evaluation, and hypothesis testing. The findings demonstrate that digital entrepreneurship and market orientation positively and significantly contribute to innovation performance. Digital entrepreneurship provides the technological and entrepreneurial capacity required to identify opportunities and develop new solutions, while market orientation ensures that innovations correspond to customer needs and competitive conditions. Digital entrepreneurship produced a relatively stronger contribution, although both capabilities were complementary. These findings imply that SME owners should integrate digital technologies with customer insight, competitor monitoring, employee competence, and coordinated decision-making to strengthen sustainable innovation and competitiveness.