An entrepreneurial finance study: MSME performance based on entrepreneurial and financial dimensions

Maria Rio Rita, Mohamad Nur Utomo


Various researches have been conducted towards the dynamics of micro, small, and medium enterprise (MSME) developments, but there are still research gaps that can be explored further. The purpose of this research is to examine the determinant factors of MSME performance as seen from the entrepreneurial dimension and the financial activities done by entrepreneurs. The research objects of this study are two batik MSME centers in Central Java Province, which are Rembang Regency and Surakarta municipality. The research model was tested by using PLS-SEM with WarpPLS version 6.0. The research findings revealed there is a positive influence between the dimensions of entrepreneurship and outside finance, entrepreneurial dimension and MSME performance, outside finance, and MSME performance, as well as innovation investment and MSME performance. Another research finding found that the entrepreneurial dimension, which consists of entrepreneurial emotion and entrepreneurial cognition, does not have a positive influence on MSME performance. Meanwhile, outside finance has a negative influence on innovation investment. This research proposes a future research agenda to add other variables that are suspected of influencing MSME performance, whether from a financial or a non-financial aspect, such as financial literacy and the application of digital marketing.

JEL Classification: A10, D19, G40




Entrepreneurship; Entrepreneurial finance; Finance; MSME Performance; PLS-SEM

Full Text:



Acedo, F. J., & Florin, J. (2006). An entrepreneurial cognition perspective on the internationalization of SMEs. Journal of International Entrepreneurship, 4(1), 49-67.

Adomdza, G. K., Åstebro, T., & Yong, K. (2016). Decision biases and entrepreneurial finance. Small Business Economics, 47(4), 819–834.

Akorsu, P. K., & Agyapong, D. (2012). Alternative model for financing SMEs in Ghana. International Journal of Arts and Commerce, 1(5), 136-148.

Alvarez, S. A., & Busenitz, L. W. (2001). The entrepreneurship of resource-based theory. Journal of Management, 27(6), 755-775.

Barkham, R., & Gudgin, G. (2002). Determinants of small firm growth: An inter-regional study in the United Kingdom 1986-90 (12): Psychology Press.

Barney, J. B., Ketchen Jr, D. J., & Wright, M. (2011). The future of resource-based theory: Revitalization or decline? Journal of Management, 37(5), 1299-1315.

Baum, J. R., Frese, M., & Baron, R. A. (2014). The psychology of entrepreneurship: Psychology Press.

Bohner, G., & Dickel, N. (2011). Attitudes and attitude change. Annual review of psychology, 62, 391-417.

Campello, M. (2006). Debt financing: Does it boost or hurt firm performance in product markets? Journal of Financial Economics, 82(1), 135-172.

Cardon, M. S., Foo, M. D., Shepherd, D., & Wiklund, J. (2012). Exploring the heart: Entrepreneurial emotion is a hot topic. Entrepreneurship Theory and Practice, 36(1), 1-10.

Chemmanur, T. J., & Fulghieri, P. (2014). Entrepreneurial finance and innovation: An introduction and agenda for future research. Review of Financial Studies, 27(1), 1-19.

Chesbrough, H. (2010). Business model innovation: opportunities and barriers. Long Range Planning, 43(2-3), 354-363.

Ciarán Mac an, B., & Brian, L. (2011). An empirical investigation of the financial growth lifecycle. Journal of Small Business and Enterprise Development, 18(4), 715-731.

Daud, S., & Yusoff, W. F. W. (2010). Knowledge management and firm performance in SMEs: The role of social capital as a mediating variable. Asian Academy of Management Journal, 15(2).

Dhaliwal, A. (2016). Role of entrepreneurship in economic development. International Journal of Scientific Research And Management, 4(6), 4262-4269.

Di Domenico, M., Haugh, H., & Tracey, P. (2010). Social bricolage: Theorizing social value creation in social enterprises. Entrepreneurship Theory and Practice, 34(4), 681-703.

Dossi, A., & Patelli, L. (2010). You learn from what you measure: financial and non-financial performance measures in multinational companies. Long Range Planning, 43(4), 498-526.

Duarte, N. (2011). Innovation, risk, and proactivity: Are firms following these strategies. WSEAS Transactions.

Fast, N. J., Sivanathan, N., Mayer, N. D., & Galinsky, A. D. (2012). Power and overconfident decision-making. Organizational behavior and human decision processes, 117(2), 249-260.

Ferreira, J. J., Garrido Azevedo, S., & Fernández Ortiz, R. (2011). Contribution of the resource-based view and entrepreneurial orientation on small firm growth. Cuadernos de Gestión, 11(1).

Fisher, G. (2012). Effectuation, causation, and bricolage: A behavioral comparison of emerging theories in entrepreneurship research. Entrepreneurship Theory and Practice, 36(5), 1019-1051.

Frydrych, D., Bock, A. J., Kinder, T., & Koeck, B. (2014). Exploring entrepreneurial legitimacy in reward-based crowdfunding. Venture Capital, 16(3), 247-269.

Ghosh, D., & Wu, A. (2012). The effect of positive and negative financial and nonfinancial performance measures on analysts' recommendations. Behavioral Research in Accounting, 24(2), 47-64.

Guo, H., Tang, J., Su, Z., & Katz, J. A. (2017). Opportunity recognition and SME performance: the mediating effect of business model innovation. R&D Management volume 47(3), 431-442.

Hair, J. F., Hult, G. T. M., Ringle, C., & Sarstedt, M. (2013). A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM). Los Angeles: SAGE.

Inmyxai, S., & Takahashi, Y. (2010). Performance contrast and its determinants between male and female-headed firms in Lao MSMEs. International Journal of Business and Management, 5(4), 37.

Javalgi, R. R. G., & Todd, P. R. (2011). Entrepreneurial orientation, management commitment, and human capital: The internationalization of SMEs in India. Journal of Business Research, 64(9), 1004-1010.

Latan, H., & Ghozali, I. (2016). Partial Least Square Konsep, Metode dan Aplikasi Menggunakan WarpPLS 5.0. Semarang: Badan Penerbit Universitas Diponegoro.

Liao, T.-S., & Rice, J. (2010). Innovation investments, market engagement and financial performance: A study among Australian manufacturing SMEs. Research Policy, 39(1), 117-125.

Mac an Bhaird, C., & Lucey, B. (2011). An empirical investigation of the financial growth lifecycle. Journal of Small Business and Enterprise Development, 18(4), 715-731.

Makpotche, M., Logossah, K., Amewokunu, Y., Lawson-Body, A., & Sedzro, K. (2015). Impact of cultural beliefs on entrepreneurs' intention to use bank loans. Journal of Applied Finance and Banking, 5(4), 11.

Manne, H. G. (2014). Resurrecting the ghostly entrepreneur. The Review of Austrian Economics, 27(3), 249-258.

Mitter, C., & Kraus, S. (2011). Entrepreneurial finance - issues and evidence, revisited. International Journal of Entrepreneurship and Innovation Management, 14(2/3), 132-150.

Nagy, B. G., Pollack, J. M., Rutherford, M. W., & Lohrke, F. T. (2012). The influence of entrepreneurs' credentials and impression management behaviors on perceptions of new venture legitimacy. Entrepreneurship: Theory & Practice, 36(5), 941-965.

Nicholls, A. (2010). The legitimacy of social entrepreneurship: Reflexive isomorphism in a pre–paradigmatic field. Entrepreneurship Theory and Practice, 34(4), 611-633.

Olawale, F., & Garwe, D. (2010). Obstacles to the growth of new SMEs in South Africa: A principal component analysis approach. African Journal of Business Management, 4(5), 729-738.

Oranburg, S. C. (2016). 4 - Start-up Financing Start-Up Creation (pp. 57-73): Woodhead Publishing.

Ortiz-Walters, R., & Gius, M. (2012). Performance of newly-formed micro-firms: The role of capital financing in minority-owned enterprises. Journal of Developmental Entrepreneurship, 17(3), 1-22.

Padilla-Meléndez, A., Fernández-Gámez, M. A., & Molina-Gómez, J. (2014). Feeling the risks: effects of the development of emotional competences with outdoor training on the entrepreneurial intent of university students. International Entrepreneurship and Management Journal, 10(4), 861-884.

Parida, V., Westerberg, M., & Frishammar, J. (2012). Inbound open innovation activities in high‐tech SMEs: The impact on innovation performance. Journal of Small Business Management, 50(2), 283-309.

Petrakis, P., & Kostis, P. (2015). The role of knowledge and trust in SMEs. Journal of the Knowledge Economy, 6(1), 105-124.

Pollack, J. M., Rutherford, M. W., & Nagy, B. G. (2012). Preparedness and cognitive legitimacy as antecedents of new venture funding in televised business pitches. Entrepreneurship Theory and Practice, 36(5), 915-939.

Prieto, I. M., & Revilla, E. (2006). Learning capability and business performance: a non-financial and financial assessment. The Learning Organization, 13(2), 166-185.

Richard, P. J., Devinney, T. M., Yip, G. S., & Johnson, G. (2009). Measuring organizational performance: Towards methodological best practice. Journal of Management, 35(3), 718-804.

Roux, I. L., & Bengesi, K. M. K. (2014). Dimensions of entrepreneurial orientation and small and medium enterprise performance in emerging economies. Development Southern Africa, 31(4), 606-624.

Rupeika-Apoga, R. (2014). Financing in SMEs: Case of the Baltic States. Procedia - Social and Behavioral Sciences, 150, 116-125.

Schumpeter, J. A. (1934). The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle: Oxford University Press.

Scott, J. T., & Scott, T. J. (2016). The entrepreneur's idea and outside finance: Theory and evidence about entrepreneurial roles. European Economic Review, 86, 118-130.

Sekaran, U., & Bougie, R. (2013). Research Methods for Business. A Skill-Building Approach. (Sixth ed.). United Kingdom: John Wiley & Sons Ltd.

Sholihin, M., & Ratmono, D. (2013). Analisis SEM-PLS dengan Warp PLS 3.0 untuk Hubungan Nonlinier dalam Penelitian Sosial dan Bisnis. Yogyakarta: Penerbit ANDI.

Van Caneghem, T., & Van Campenhout, G. (2012). Quantity and quality of information and SME financial structure. Small Business Economics, 39(2), 341-358.

Verhees, F. J. H. M, & Meulenberg, M. T. G. (2004). Market orientation, innovativeness, product innovation, and performance in small firms. Journal of Small Business Management, 42(2), 134-154.

Yannopoulos, P., Auh, S., & Menguc, B. (2012). Achieving fit between learning and market orientation: Implications for new product performance. Journal of Product Innovation Management, 29(4), 531-545.



  • There are currently no refbacks.

Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:

2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 812-2710-3387 or +62 813-3180-1534

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0