The Mediation Effect of Business Strategy on the Relations between External Factors, Internal Factors and Business Performance

This study aims to test the influence of external, internal factors and business strategy on business performance, in addition to the mediation effect of business strategy on external, internal and business performance. This research was carried out in 150 restaurants in Dili, Timor-Leste, and questionnaires were used to collect data. SMART-PLS 3.0 was used to test the hypothesis. The finding reveals that external factors had no significant impact on business performance, and internal factors positively influenced business performance. The mediation effect of external and internal factors had no significant impact on business performance. This research extends the empirical works of Huang & Lee (2012), Metts, (2007) and Barney (1991) on the relationship among external factors, internal factors, and business strategy and performance. This study practically contributes to the restaurant manager and regulators being aware of threats and opportunities from the external environment and improving internal construct to enhance business performance.