Measurement of Model Business Environment, Entrepreneurial Orientation, and Innovation Capability: Confirmatory Factor Analysis Approach

Abstract

Micro, Small and Medium Enterprises (MSMEs) play a crucial role in the Indonesian economy and are regarded to have the potential to reduce poverty by creating employment opportunities. Malang City predominantly relies on micro, small, and medium-scale economic activities, particularly Batik MSMEs, which are crucial in supporting the tourism sector. The term commonly used to refer to Malang Batik is "Malangan" Batik. This research aims to conduct a confirmatory factor analysis to examine the measuring model of the business environment, entrepreneurial orientation, and innovation capacity. A total of 100 batik micro, small, and medium enterprises (MSMEs) in Malang City were selected as the sample for this research. The data analysis was conducted using confirmatory factor analysis (CFA) methodologies. According to the results of the confirmatory factor analysis, it was determined that the customer indicator had the most significant impact on shaping business environment variables. Risk-taking is regarded as the primary factor that significantly influences the formation of the entrepreneurial orientation characteristic. Marketing innovation is the most reliable sign of developing innovation capabilities. Malang City's Batik MSME companies are actively engaging in collaboration with suppliers, demonstrating a proactive approach in seeking market prospects and promoting new goods in untapped areas. Additionally, there is a need to enhance technological innovation.