Enhancing SME performance: an integrated PLS-SEM and DEMATEL approach to entrepreneurial orientation, intellectual capital, and innovation product

Despite extensive research on SME performance, empirical studies that simultaneously integrate entrepreneurial orientation, intellectual capital, and innovation product using both structural modeling and causal-mapping approaches remain limited. Addressing this gap, this study examines the relationships among entrepreneurial orientation, intellectual capital, innovation product, and Small and Medium Enterprise (SME) performance. Data were collected from 149 clothing SME owners in Tanah Abang and Cipulir, Jakarta, and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) and the Decision-Making Trial and Evaluation Laboratory (DEMATEL). The PLS-SEM results show that entrepreneurial orientation is positively associated with innovation product (β = 0.228, p < 0.001) and SME performance (β = 0.212, p < 0.001). Intellectual capital demonstrates a stronger positive association with both innovation product (β = 0.724, p < 0.001) and SME performance (β = 0.646, p < 0.001). Innovation product is also positively associated with SME performance (β = 0.159, p < 0.001). Mediation analysis indicates that innovation product partially mediates the relationship between entrepreneurial orientation and SME performance (indirect effect = 0.036) as well as between intellectual capital and SME performance (indirect effect = 0.115), suggesting that strategic orientation and knowledge-based resources contribute to performance through innovative outputs. Complementing these findings, DEMATEL analysis identifies entrepreneurial orientation and intellectual capital as primary causal drivers, while innovation product and SME performance function predominantly as effect variables. By integrating PLS-SEM and DEMATEL, this study offers a more nuanced understanding of both the magnitude and directional interdependence of key determinants of SME performance.