Open innovation in village-owned enterprises: the role of entrepreneurial orientation in improving financial and social performance

Unresolved issue regarding the role of entrepreneurial orientation in improving the financial and social performance of village-owned enterprises, as well as the importance of mediating the effect of open innovation, is the reason why this study was undertaken. The study involved 200 village-owned enterprises from 10 regencies in Central Java and Yogyakarta, Indonesia, and employed a purposive sampling method for data collection. Data analysis was conducted using SEM AMOS version 23. The results show that entrepreneurial orientation has an effect on financial performance and open innovation, but has no significant effect on social performance. Open innovation has a significant effect on social performance and financial performance. The research also supports the notion that open innovation acts as a mediator in the relationship between entrepreneurial orientation and financial and social performance. Therefore, the study recommends that village-owned enterprises should focus on increasing open innovation to improve performance, particularly in the social sphere, and that they should strive to retain managers with a high level of entrepreneurial orientation.