The mediating effect of strategy on entrepreneurial orientation and performance

Purpose This study aims to examine the effect of entrepreneurial orientation (EO) on performance and mediation differentiation strategies and market development in small and medium enterprises (SMEs). Design/methodology/approach This research was conducted using a survey method with a population of furniture SMEs in Jepara, Central Java, Indonesia using a sample area by collecting 158 questionnaires. The data analysis method used the partial least square. Findings The result shows that EO has an impact on differentiation, market development and performance. Differentiation strategies and market development mediate the influence of EO and performance. The differentiation strategy further mediates the influence of EO on market development and market development mediates the effect of differentiation on performance. Practical implications Managers instill entrepreneurial practice in the organization by proactively creating the market and taking high-risk jobs to provide quality products and services. SMEs require capabilities that are difficult to imitate in creating designs and product quality that are different, providing pre and post-sales services and maintaining good relationships with customers and partners. SMEs emphasize flexibility and speed of operation by adjusting the production process to short waiting times and reliable delivery. The government must support general training and market information, network development, access to capital and knowledge transfer. Originality/value This paper explains the importance of differentiation and market development strategies in determining the relationship between EO and performance that has not been explored in the context of SMEs in developing countries.