Linking entrepreneurial marketing to business performance: Innovation mediation and market sensing moderation

Relacionando o marketing empreendedor ao desempenho empresarial: Mediação pela inovação e moderação pela percepção do mercado

Abstract

Purpose: The study aims to examine how entrepreneurial marketing (EM), operationalized as market orientation (MO) and entrepreneurial orientation (EO), influences the business performance (BP) of traditional weaving micro-enterprises (MEs), while considering the mediating role of marketing innovation (MI) and the moderating effect of market sensing capability (MSC).

Originality/value: This research contributes a contextualized framework that integrates Resource-Based Theory (RBT) and Dynamic Capability Theory (DCT) to explain how entrepreneurial strategies interact with dynamic capabilities to influence performance in heritagebased enterprises. While prior studies of entrepreneurial marketing primarily focus on general MEs, this study extends the discussion to cultural micro-enterprises, demonstrating that MO and EO yield different innovation pathways. The study adds value by highlighting the strategic importance of MSC as a capability that amplifies the benefits of innovation, particularly for market-oriented firms.

Design/methodology/approach: A quantitative approach was used to test a theoretical model with Partial Least Squares Structural Equation Modeling (PLS-SEM). Data were collected from 190 Karawo micro-enterprises across Gorontalo province. MO and EO were conceptualized as strategic resources within RBT, whereas MSC was positioned as a dynamic capability aligned with DCT.

Findings: MO significantly affects BP, both directly and indirectly through MI, suggesting partial mediation. EO, however, impacts BP only indirectly via MI, reflecting full mediation. Furthermore, MSC strengthens MO’s effect on MI but does not moderate the EO-MI relationship. These results suggest that market-oriented MEs achieve greater performance when supported by strong market sensing and marketing innovation capabilities.

Contributions/implications: This study contributes to the entrepreneurial marketing literature by demonstrating that Market Orientation and Entrepreneurial Orientation influence business performance through different innovation pathways in heritage-based micro-enterprises. The findings extend the integration of Resource-Based Theory and Dynamic Capability Theory by highlighting the mediating role of Marketing Innovation and the conditional role of Market Sensing Capability. In practice, the study suggests that traditional micro-enterprises can improve performance by strengthening market-oriented behaviors, enhancing marketing innovation, and developing market-sensing capabilities to respond more effectively to changing customer needs.

Keywords:
entrepreneurial marketing; marketing innovation; market sensing capability; business performance; micro-enterprises

Resumo

Objetivo:  Este estudo tem como objetivo examinar como o marketing empreendedor (EM), representado pela orientação para o mercado (MO) e pela orientação empreendedora (EO), influencia o desempenho empresarial (BP) de microempresas de tecelagem tradicional, considerando o papel mediador da inovação em marketing (MI) e o efeito moderador da capacidade de percepção de mercado (MSC). Originalidade/valor: Esta pesquisa contribui com um modelo contextualizado ao integrar a Teoria Baseada em Recursos (Resource-Based Theory - RBT) e a Teoria das Capacidades Dinâmicas (Dynamic Capability Theory - DCT) para explicar como as estratégias empreendedoras interagem com as capacidades dinâmicas e influenciam o desempenho em empresas baseadas no patrimônio cultural. Enquanto estudos anteriores sobre marketing empreendedor concentraram-se principalmente em microempresas em geral, este estudo amplia a discussão para microempresas culturais, demonstrando como a MO e a EO produzem trajetórias de inovação distintas. O estudo agrega valor ao destacar a importância estratégica da MSC como capacidade que potencializa os benefícios da inovação, especialmente em empresas orientadas para o mercado. Desenho/metodologia/abordagem: Adotou-se uma abordagem quantitativa, com a Modelagem de Equações Estruturais por Mínimos Quadrados Parciais (PLS-SEM), para testar o modelo teórico proposto. Os dados foram coletados de 190 microempresas Karawo na província de Gorontalo, Indonésia. A MO e a EO foram conceituadas como recursos estratégicos sob a perspectiva da RBT, enquanto a MSC foi posicionada como uma capacidade dinâmica em consonância com a DCT.

Resultados:  Os resultados indicam que a MO afeta significativamente o BP, de forma direta e indireta por meio da MI, sugerindo mediação parcial. Por outro lado, a EO influencia o BP apenas indiretamente, por meio da MI, o que caracteriza uma mediação total. Além disso, a MSC fortalece o efeito da MO sobre a MI, mas não modera a relação entre EO e MI. Esses resultados sugerem que microempresas orientadas para o mercado alcançam um melhor desempenho quando apoiadas por sólidas capacidades de percepção de mercado e de inovação em marketing. Contribuições/implicações: Este estudo contribui para a literatura de marketing empreendedor ao demonstrar que a Orientação para o Mercado e a Orientação Empreendedora influenciam o desempenho empresarial por meio de diferentes trajetórias de inovação em microempresas baseadas no patrimônio cultural. Os resultados ampliam a integração entre a Teoria Baseada em Recursos e a Teoria das Capacidades Dinâmicas ao evidenciar o papel mediador da Inovação em Marketing e o papel condicional da Capacidade de Percepção de Mercado. Do ponto de vista prático, o estudo sugere que microempresas tradicionais podem melhorar seu desempenho fortalecendo comportamentos orientados ao mercado, ampliando a inovação em marketing e desenvolvendo capacidades de percepção de mercado para responder de forma mais eficaz às mudanças nas necessidades dos clientes.

Palavras-chave:
marketing empreendedor; inovação em marketing; capacidade de percepção de mercado; desempenho empresarial; microempresas

INTRODUCTION

Entrepreneurial marketing (EM) has gained considerable attention as a strategic approach to addressing performance challenges among micro-enterprises, particularly in resource-constrained and highly dynamic environments (Eggers et al., 2012; Sahu & Panda, 2024). EM integrates entrepreneurial thinking with market-oriented behavior, enabling firms to respond proactively to customer needs and environmental uncertainty (Morris et al., 2002). In emerging economies, this approach is increasingly recognized as essential for improving competitiveness, innovation, and long-term sustainability among micro and small enterprises (Adel et al., 2020; Sadiku-Dushi et al., 2019). In Indonesia, micro-enterprises (MEs) are a critical pillar of the economy, contributing more than 61% to GDP and employing over 97% of the national labor force (Indonesia, 2024). Despite their pivotal role, many micro-enterprises continue to struggle with low productivity, limited market access, limited digital adoption, and insufficient innovation capabilities (Rafiki et al., 2021; Kaluku et al., 2025). These challenges are particularly evident in traditional and culturally embedded industries such as the Karawo weaving sector in Gorontalo Province.

Karawo is a culturally embedded textile craft that reflects Gorontalo’s artistic identity and local heritage (Kaluku et al., 2026). Despite its cultural significance, the sector has seen declining market performance in recent years. According to the local government agency (Gorontalo, 2024), Karawo micro-enterprises saw sales decline from 2021 to 2023. This decline reflects broader structural limitations in entrepreneurial capacity, innovation agility, and market responsiveness. Furthermore, the sector still relies heavily on traditional marketing channels and informal business practices, limiting its ability to adapt to rapidly changing consumer preferences and digital market trends.

Resource-Based Theory (RBT) offers a foundational lens for explaining how internal capabilities such as entrepreneurial orientation, creativity, and resource leveraging can foster sustained competitive advantage and improve performance (Barney et al., 2021 Peteraf & Bergen, 2003). However, RBT has been criticized for overlooking the need for dynamic adaptation in a turbulent environment (Barney et al., 2011). Accordingly, scholars increasingly integrate Dynamic Capability Theory (DCT), which emphasizes a firm’s ability to sense, seize, and reconfigure resources to match shifting external conditions (Teece, 2007). Within this framework, Market Sensing Capability (MSC) emerges as a critical enabler, allowing micro-enterprises to anticipate customer preferences and competitive shifts with greater precision (Dias & Lages, 2021; Hoang et al., 2024).

Furthermore, Marketing Innovation (MI) serves as a key mediator linking entrepreneurial marketing to Business Performance (BP). By introducing new promotional channels, digital platforms, and customer engagement strategies, micro-enterprises can overcome market inertia and improve brand recognition and profitability (Olazo, 2022; Quaye & Mensah, 2019). However, empirical evidence on the effect of EM on business performance remains mixed. While some studies report significant positive effects (Adel et al., 2020; Buccieri & Park, 2022), others find results that are insignificant or context-dependent (Morimura & Sakagawa, 2023; Rafiki et al., 2021), suggesting that mediating and moderating variables may play a crucial role.

Prior studies examining the relationship between entrepreneurial marketing and business performance have produced inconsistent findings across SME contexts (Al-Shaikh & Hanaysha, 2023). While several studies report significant positive effects of entrepreneurial marketing on firm performance, others suggest that the relationship may depend on intervening mechanisms such as innovation capability or market responsiveness. Furthermore, few studies have simultaneously examined the mediating role of marketing innovation and the moderating role of market sensing capability within heritage-based micro-enterprises operating in culturally embedded industries. First, it explores the direct and indirect relationships between entrepreneurial marketing and business performance, incorporating marketing innovation as a mediator. Second, it integrates market sensing capability as a moderator, enhancing firms’ ability to capitalize on entrepreneurial activities. Third, the study contextualizes these relationships within a culturally grounded, low-tech sector of Karawo micro-enterprises in Gorontalo, to generate insights that are both theoretically robust and practically actionable.

Grounded at the intersection of RBT and DCT, this study proposes a conceptual model in which entrepreneurial orientation and market orientation (components of entrepreneurial marketing) influence business performance through marketing innovation, with market sensing capability moderating this relationship. By empirically validating this framework, the research contributes to the scholarly discourse on entrepreneurial marketing. It offers strategic guidance for policymakers and practitioners seeking to revitalize traditional industries through adaptive marketing strategies.

Despite growing interest in the relationship between entrepreneurial marketing and business performance, empirical findings remain inconclusive, particularly in micro-enterprise contexts in emerging economies. This study seeks to address this knowledge gap by posing the following research questions:

• 1. To what extent does entrepreneurial marketing influence the business performance of micro-enterprises in the Karawo textile sector in Gorontalo?

• 2. Does entrepreneurial marketing positively affect marketing innovation?

• 3. Does marketing innovation mediate the relationship between entrepreneurial marketing and business performance?

• 4. Does market sensing capability moderate the relationship between entrepreneurial marketing and marketing innovation, thereby enhancing the impact of entrepreneurial marketing under high sensing conditions?

These questions are designed to unravel the mechanisms and boundary conditions through which EM influences firm outcomes, with particular emphasis on resource deployment, strategic agility, and innovation behavior in resource-scarce settings.

The remainder of this paper is organized as follows. Section 2 reviews the study’s theoretical foundations and develops the research hypotheses. Section 3 outlines the research methodology, including sampling, measurement development, and data analysis. Section 4 presents the empirical findings and the results of the hypothesis testing. Finally, Section 5 discusses the theoretical and managerial implications of the findings, outlines the study’s limitations, and provides recommendations for future research.

THEORY AND HYPOTHESIS

Resource-based theory and dynamic capability theory

Resource-Based Theory (RBT) holds that a firm’s sustained competitive advantage stems from internal resources that are valuable, rare, inimitable, and non-substitutable(Barney, 1991) (). Prior studies have emphasized that internal strategic resources, such as entrepreneurial capability, knowledge, and innovation orientation, are critical determinants of small-firm competitiveness (Barney et al., 2021). In the context of micro-enterprises, particularly those operating in traditional and culturally embedded industries, these resources may include artisanal expertise, local identity, and cultural heritage embedded in the production process (Kaluku et al., 2025). Karawo weaving enterprises in Gorontalo represent such a context, where cultural value and traditional craftsmanship constitute important intangible resources for business sustainability. However, ownership of such resources does not guarantee improved performance unless they are strategically leveraged. Entrepreneurial Marketing (EM) functions as an internal capability that activates these latent resources through proactivity, innovation, and value creation (Morris et al., 2002; Sahu & Panda, 2024). EM enables microenterprises to transform traditional strengths into competitive advantage by adapting to evolving market needs.

However, prior studies show inconsistent effects of EM on performance (e.g., Adel et al., 2020; Rafiki et al., 2021), suggesting that additional mechanisms, such as innovation and market responsiveness, are required to translate EM into tangible outcomes.

Dynamic Capability Theory (DCT) complements RBT by emphasizing a firm’s ability to adapt, integrate, and reconfigure internal and external competencies in response to market change (Bari et al., 2024). This is especially relevant for micro-enterprises operating in volatile and resourceconstrained environments, where rapid market shifts require continuous adaptation and strategic flexibility (Dias & Lages, 2021). Key dynamic capabilities include market sensing capability, the ability to detect and respond to market signals, and marketing innovation, which involves adopting new methods to engage customers and expand reach (Olazo, 2022). In the Karawo textile industry, these capabilities allow firms to shift from reactive, traditional marketing to proactive, adaptive strategies aligned with evolving consumer trends.

DCT thus provides a critical lens for understanding how entrepreneurial marketing translates into performance, not just through resource possession but through continuous strategic adaptation. This perspective is essential for revitalizing traditional micro-enterprises facing declining demand and limited innovation.

Integrating Resource-Based Theory and Dynamic Capability Theory provides a holistic framework for understanding how micro-enterprises achieve performance. RBT identifies Entrepreneurial Marketing as a strategic internal resource, while DCT emphasizes the adaptive deployment of such resources through dynamic capabilities (Teece, 2007; Barney et al., 2021).

In this study, marketing innovation is proposed as a mediator, translating EM into improved performance, while market sensing capability acts as a moderator, strengthening the EM-MI relationship under highresponsiveness conditions.

Applied to the Karawo textile sector, this integrated model explains how firms can transform cultural and entrepreneurial strengths into competitive outcomes through innovation and adaptability. The framework offers practical insights for navigating dynamic markets with limited resources.

In this study, Resource-Based Theory and Dynamic Capability Theory are not treated merely as complementary background perspectives but as the primary theoretical foundation guiding the development of the conceptual model. RBT explains how Entrepreneurial Marketing represents an internal strategic resource capable of generating competitive advantage, while DCT clarifies how firms translate these strategic resources into adaptive and innovative responses through Marketing Innovation and Market Sensing Capability. Thus, the integration of RBT and DCT provides a coherent explanation of how heritage-based micro-enterprises transform entrepreneurial capabilities into sustainable performance outcomes under dynamic market conditions.

Within the proposed framework, Market Orientation and Entrepreneurial Orientation are conceptualized as strategic internal resources under RBT. In contrast, Marketing Innovation and Market Sensing Capability are dynamic capability mechanisms that enable firms to adapt to changing market conditions.

Entrepreneurial marketing and business performance

Entrepreneurial Marketing has emerged as a critical strategic posture for micro-enterprises seeking to enhance their performance in highly dynamic environments. EM blends the opportunity-seeking behavior of entrepreneurship with the customer-centric logic of marketing, primarily through two foundational dimensions: MO and EO (Zacca & Alhoqail, 2021).

Market Orientation reflects the enterprise’s capacity to understand and respond to customer needs, competitor movements, and inter-functional coordination (Narver & Slater, 1990). In micro-enterprises such as Gorontalo’s Karawo textile producers, MO enables firms to monitor consumer preferences and adjust product offerings accordingly, particularly in ceremonial and cultural contexts where demand is event-driven (Kaluku et al., 2025). MO promotes long-term relational value and customer retention, two critical levers of business performance in culturally embedded markets.

Entrepreneurial Orientation, on the other hand, encompasses proactiveness, innovativeness, and risk-taking (Alqahtani et al., 2024). For micro-enterprises operating under resource constraints and within informal systems, EO offers a cognitive and behavioral framework that fosters adaptive experimentation and the exploitation of opportunities (Adam et al., 2024). In the Karawo sector, firms demonstrating high EO have been shown to pursue novel product designs, digital platforms, and alternative market channels to overcome declining local demand and revenue stagnation (Gorontalo, 2024).

Integrating MO and EO within the EM framework equips microenterprises with both market responsiveness and strategic agility, enabling them to meet current customer expectations while shaping future market possibilities. Empirical evidence supports the positive relationship between EM and business performance, both directly and through mediators such as marketing innovation (Buccieri & Park, 2022; Eggers et al., 2012). However, inconsistencies remain in prior findings (e.g., Rafiki et al., 2021), suggesting that contextual and capability-based factors such as market sensing or innovation systems may condition the strength of this relationship.

In resource-scarce yet culturally rich settings, such as Karawoproducing regions, EM functions not only as a commercial strategy but also as a survival mechanism. It enables firms to convert indigenous knowledge and intangible cultural assets into economically viable propositions. Based on prior empirical findings suggesting that entrepreneurial marketing enhances competitive advantage and firm performance (Buccieri & Park, 2022; Eggers et al., 2012), the following hypothesis is proposed:

• H1: EM has a positive effect on BP.

• H1a: MO has a positive effect on BP.

• H1b: EO has a positive effect on BP.

Entrepreneurial marketing and marketing innovation

In dynamic and uncertain markets, marketing innovation (MI) plays a critical role in enabling micro-enterprises to enhance visibility, reach, and customer engagement. MI involves implementing new marketing methods, including changes in design, pricing, distribution, or promotion, that enhance firm competitiveness (OECD, 2005 Olazo, 2022). In traditional sectors such as the Karawo textile industry in Gorontalo, where cultural value is deeply embedded in the product yet commercialization strategies remain underdeveloped, fostering innovation in marketing is essential for sustainable performance.

EM, operationalized through MO and EO, serves as a key antecedent to MI. Market Orientation focuses on identifying and fulfilling explicit and latent customer needs by acquiring market intelligence and distributing it across organizational functions (Narver & Slater, 1990). In micro-enterprises, particularly in Karawo production, MO enables firms to sense shifts in ceremonial demand patterns, tourist preferences, or urban fashion trends, and adapt messaging, packaging, or distribution strategies accordingly. A marketoriented firm is thus more likely to pursue marketing innovations that align with updated consumer expectations and enhance relevance in broader markets.

Entrepreneurial Orientation, comprising innovativeness, risk-taking, and proactiveness (Visser & van Scheers, 2020), complements MO by encouraging firms to act decisively on market insights. In Gorontalo’s Karawo context, EO drives experimentation with new branding, participation in national exhibitions, and use of digital platforms such as Instagram or online marketplaces strategies that reflect marketing innovation in both form and channel. Firms with higher EO are more willing to invest in novel promotional tools or to collaborate with influencers, even in the absence of prior evidence of demand, thereby opening new market pathways.

The synergistic effect of MO and EO within the EM framework provides both the market rationale and the entrepreneurial drive to innovate. This duality is particularly critical in informal, resource-constrained settings where innovation is often improvisational and contingent on local knowledge (Clauss et al., 2021). As demonstrated in prior studies, EM positively influences marketing innovation, especially when firms possess both external market awareness and an internal willingness to disrupt status quo practices (Ji, 2023; Ramirez et al., 2018).

Among Karawo producers, firms that exhibit both MO and EO are more likely to reimagine the traditional textile value through storytelling, thematic product series (e.g., for weddings or national holidays), and a unique visual identity, thereby driving marketing innovation. Drawing upon prior studies indicating that entrepreneurial orientation and market orientation stimulate firms’ innovation activities and adaptive marketing behavior (Ji, 2023; Ramirez et al., 2018), the following hypothesis is proposed:

• H2: EM has a positive effect on MI.

• H2a: MO has a positive effect on MI.

• H2b: EO has a positive effect on MI.

Business performance among micro-enterprises depends not only on internal capabilities but also on how effectively these capabilities are operationalized through innovation. EM, composed of MO and EO, provides firms with a strategic foundation for understanding market needs and acting on them with agility and creativity (Morris et al., 2002). However, the pathway from EM to performance is rarely linear; marketing innovation (MI) often plays a critical mediating role in translating strategic intent into market impact. In the context of Gorontalo’s Karawo micro-enterprises, MO enables firms to track and respond to consumer trends, such as rising interest in cultural souvenirs or ceremonial wear, by reconfiguring marketing strategies accordingly. EO, by contrast, fosters experimentation and calculated risk-taking, which are crucial for testing new promotional methods, branding approaches, and channel diversification. These orientations, while distinct, jointly empower firms to implement marketing innovations such as digital catalogs, storytelling-based branding, or strategic participation in cultural festivals.

Marketing innovation, in turn, enhances business performance by increasing visibility, expanding customer reach, and improving value communication (Olazo, 2022; Quaye & Mensah, 2019). For example, Karawo producers who adopt social media marketing or e-commerce platforms have been able to penetrate non-local markets and generate consistent revenue streams, even amid fluctuations in local demand. MI serves as the conduit through which MO and EO exert performance outcomes. Without it, strategic orientations may remain inert or misaligned with evolving consumer expectations. Empirical evidence supports this mediating mechanism. Studies have found that EM positively influences innovation outcomes, which then contribute significantly to firm growth and profitability (Eggers et al., 2012; Sadiku-Dushi et al., 2019).

Thus, the present study hypothesizes that marketing innovation mediates the relationship between entrepreneurial marketing (MO and EO) and business performance. Consistent with prior empirical findings highlighting the mediating role of innovation in transforming strategic orientations into performance outcomes (Sadiku-Dushi et al., 2019; Olazo, 2022), the following hypothesis is proposed:

• H3: MI acts as a mediator between EM and BP.

• H3a: MI acts as a mediator between MO and BP.

• H3b: MI acts as a mediator between EO and BP.

Moderating effect of market sensing capability

Entrepreneurial Marketing, comprising Market Orientation and Entrepreneurial Orientation, equips firms with both strategic awareness and proactive behavior to navigate dynamic markets. However, the effectiveness of EM in driving marketing innovation (MI) depends on the firm’s capacity to sense and interpret market signals. This capacity, known as Market Sensing Capability (MSC), moderates the extent to which EM leads to innovative marketing practices. MO provides the cognitive framework for identifying and understanding customer needs, competitor moves, and environmental trends (Narver & Slater, 1990). For Karawo textile micro-enterprises, MO enables producers to capture demand fluctuations associated with cultural events, tourism cycles, and seasonal trends. However, recognizing these shifts is not sufficient; firms must also be able to sense subtle market changes and translate them into actionable insights.

Entrepreneurial Orientation, with its emphasis on innovation, risktaking, and proactivity (Abbas et al., 2023), promotes experimentation with marketing strategies, such as adopting digital branding or exploring non-traditional sales channels. However, EO-based actions can be misaligned or ineffective if not grounded in up-to-date market intelligence. Here, MSC plays a critical role in strengthening the EO-MI relationship by ensuring that entrepreneurial initiatives are contextually informed and market-relevant. Market Sensing Capability is defined as the firm’s ability to collect, analyze, and act upon market information in a timely and meaningful way (Dias & Lages, 2021). High MSC allows micro-enterprises to validate the direction of their marketing innovations, e.g., launching themed Karawo collections tied to national identity movements or leveraging festivalbased promotions. Conversely, low MSC may result in misguided innovation, despite strong entrepreneurial intent or market orientation.

Recent literature affirms the significance of sensing capabilities in amplifying the innovation process. Studies have shown that firms with superior MSC are more responsive and adaptive, and better able to convert EM into tangible marketing innovations (Hoang et al., 2024; Kristinae et al., 2023). In traditional sectors like Karawo, where consumer behavior evolves alongside cultural reinterpretations and digital exposure, MSC serves as a boundary condition that shapes the strength of EM’s impact on innovation.

Accordingly, this study posits that Market Sensing Capability positively moderates the relationship between Entrepreneurial Marketing (MO and EO) and Marketing Innovation, such that the relationship is stronger when MSC is high. Firms with stronger sensing capabilities are expected to respond more effectively to environmental changes and enhance innovation outcomes (Dias & Lages, 2021). Therefore, the following hypothesis is proposed:

• H4: MSC positively moderates the effect of EM on MI.

• H4a: MSC moderates the relationship between MO and MI.

• H4b: MSC moderates the relationship between EO and MI.

The conceptual framework based on previous research is outlined in Figure 1.

Figure 1
Theoretical model

Figure 2
Estimated PLS-SEM

RESEARCH DESIGN AND METHODOLOGY

To contextualize the empirical model, the constructs in Figure 1 were derived from the real-world challenges faced by Karawo MEs in Gorontalo, Indonesia. This study adopts a quantitative, explanatory design to examine the relationships among entrepreneurial marketing, marketing innovation, market sensing capability, and business performance. The model is grounded in the realities of Karawo micro-enterprises, which operate within trust-based supply chains, experience demand fluctuations linked to cultural cycles, and often lack formal governance structures. In this context, entrepreneurial marketing represents firms’ capacity to respond proactively to market challenges, while innovation and sensing capabilities serve as mechanisms for managing uncertainty.

The model was operationalized through a structured questionnaire administered to owner-managers of Karawo MEs. The measurement instruments were adapted from validated scales and refined through expert review and pre-testing to ensure contextual relevance. PLS-SEM using SmartPLS 4.0 was employed to examine mediation (EM → MI → BP) and moderation (EM × MSC → MI) effects, with bootstrapping used to assess path significance. This research design provides both empirical validation of the proposed model and practical insights into how traditional MEs can enhance resilience and performance through improved marketing and innovation practices.

Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed using SmartPLS 4.0 because the study aims to simultaneously examine complex mediation and moderation relationships within a predictive research framework. PLS-SEM is particularly appropriate for exploratory and theory-development studies involving latent constructs, relatively small sample sizes, and non-normal data distributions (Hair et al., 2019). Moreover, the method is suitable for micro-enterprise research contexts where data variability and measurement heterogeneity are commonly observed.

Sampling

The study employed purposive sampling because respondents were required to meet specific criteria, namely being active owner-managers of Karawo weaving micro-enterprises operating in Gorontalo Province. This approach is appropriate when researchers seek information-rich cases that provide contextual insights relevant to the research objectives (Sekaran & Bougie, 2019).

The respondents in this study were karawo weaving micro-enterprises in Gorontalo Province, Indonesia. The total number of respondents was 190. The sample size of 190 respondents meets the minimum requirement for PLS-SEM analysis and is considered adequate for complex structural models involving mediation and moderation effects (Hair et al., 2019). The characteristics of the surveyed respondents primarily reflect those of karawo weaving MEs across age, length of business operation, gender, and monthly turnover. This paper utilized SPSS 29 and SmartPLS 4 software for data processing and analysis. The distribution of the ME sample is presented in Table 1.

Table 1
Respondent characteristics

Type Data	Personal Characteristics of Respondents	N=190 (Frequency)	Percentage (%)
Age	< 30 Years 30 to 40 Years 40 to 50 Years > 50 Years	0 30 52 108	0 15,8 27,4 56,8
Gender	Male Female	22 168	11,3 88,7
Length of business	< 1 Year 1 to 3 Years > 3 Years	0 9 181	0 4,7 95,3
Turnover/Month (million rupiah)	<5 5-25 26-50 51-100 101-200	24 68 56 30 12	12,63 35,79 29,47 15,79 6,32

Measures

All measures were adapted from previously validated instruments and adjusted to reflect the socio-economic and operational characteristics of Karawo textile micro-enterprises in Gorontalo, Indonesia. Given the traditional, low-tech, and culturally embedded nature of these enterprises, the instruments were modified to ensure content validity and contextual relevance. All constructs were measured using reflective indicators and assessed on a five-point Likert scale ranging from 1 (“strongly disagree”) to 5 (“strongly agree”). This scale was selected because it is widely used in behavioral and entrepreneurial research to capture perceptions, attitudes, and strategic orientations consistently across respondents (Hair et al., 2014).

The construct Entrepreneurial Marketing assessed in this study includes Market Orientation and Entrepreneurial Orientation. MO was measured based on first-to-market the product, customer needs, and focus on customers, following Sahu & Panda (2024). EO was assessed through low-risk, low-cost, value-creation, cost-saving, cost-efficient, product development, and concept development. MO and EO reflect how Karawo MEs identify and act upon market opportunities using internal resourcefulness and culturally shaped intuition.

Marketing Innovation was measured using a scale capturing the firm’s ability to adopt novel marketing methods, such as product design improvements, acceptable product design, competitive prices, affordable prices according to quality, updating layouts, customer discounts, and promotional media. The instrument was adapted from Quaye & Mensah (2019), with adjustments reflecting the unique marketing context of traditional crafts.

Market Sensing Capability referred to the ME’s ability to gather, interpret, and act upon market intelligence in uncertain environments. It was measured based on a firm’s responsiveness to searching for market information, utilizing information, anticipating competitor actions, broadcasting new designs, building a database, and following (Kahneman, 2005; Teece, 2007). For Karawo producers, MSC was particularly relevant due to demand seasonality and reliance on informal feedback loops within local networks.

Lastly, Business Performance (BP) was assessed using both subjective financial and non-financial indicators, including increased sales, increased profits, customer use of the product, and increased customer loyalty. These performance outcomes were tailored to reflect how micro-enterprises in cultural industries define success, often beyond profitability to consider social value, cultural legitimacy, and continuity of operations amid resource constraints.

The final constructs and items are presented in the Appendix.

Validity and reliability assessment

Convergent validity was assessed using factor loadings and Average Variance Extracted (AVE), with recommended thresholds exceeding 0.70 and 0.50, respectively (Hair et al., 2019). Internal consistency reliability was evaluated using Cronbach’s alpha and Composite Reliability (CR), where values above 0.70 indicate acceptable reliability. Discriminant validity was assessed using the Fornell-Larcker criterion (Fornell & Larcker; David, 1981).

ANALYSIS AND RESULTS

Measurement model assessment

Table 2 presents the measurement model assessment results, including factor loadings, Cronbach’s alpha, composite reliability (CR), and average variance extracted (AVE). All indicators exceed the recommended loading threshold of 0.70, confirming satisfactory indicator reliability.

Table 2
Construct reliability and validity

Constructs	Items	Factor loading	Cronbach’s alpha	CR	AVE
MO	X1.1	0.859	0.844	0.849	0.761
	X1.2	0.880
	X1.3	0.878
EO	X2.1	0.720	0.889	0.903	0.596
	X2.2	0.741
	X2.3	0.747
	X2.4	0.814
	X2.5	0.819
	X2.6	0.827
	X2.7	0.730
MI	Z1	0.802	0.913	0.915	0.658
	Z2	0.814
	Z3	0.796
	Z4	0.843
	Z5	0.791
	Z6	0.806
	Z7	0.823
MSC	M1	0.835	0.879	0.882	0.674
	M2	0.830
	M3	0.809
	M4	0.823
	M5	0.807
BP	Y1	0.899	0.916	0.921	0.799
	Y2	0.899
	Y3	0.892
	Y4	0.885

Market Orientation (MO) comprises three indicators, each with a loading ranging from 0.859 to 0.880. The construct demonstrates good reliability (Cronbach’s alpha = 0.844; CR = 0.849) and strong convergent validity (AVE = 0.761), indicating that it effectively captures customer-focused and market-driven behaviors among Karawo MEs. Entrepreneurial Orientation (EO), measured by seven indicators with loadings between 0.720 and 0.827, also exhibits strong reliability (Cronbach’s alpha = 0.889; CR = 0.903) and adequate convergent validity (AVE = 0.596). These results confirm that EO is consistently reflected through entrepreneurial behaviors such as value creation, innovation, and risk management within the Karawo context.

Marketing Innovation (MI) is measured using seven indicators with loadings ranging from 0.791 to 0.843. The construct demonstrates strong reliability (Cronbach’s alpha = 0.913; CR = 0.915) and convergent validity (AVE = 0.658), confirming its ability to capture firm-level efforts in product design, pricing, and promotion. Market Sensing Capability (MSC), represented by five indicators with loadings ranging from 0.807 to 0.835, also exhibits high reliability (α = 0.879; CR = 0.882) and convergent validity (AVE = 0.674), indicating that the construct is well represented in the measurement model.

Business Performance (BP) shows the highest factor loadings, ranging from 0.885 to 0.899, with excellent reliability (α = 0.916; CR = 0.921) and convergent validity (AVE = 0.799). These results suggest consistent assessment of both financial and customer-related performance dimensions. Overall, the measurement model demonstrates strong psychometric properties, with all constructs meeting the recommended reliability and convergent validity thresholds, confirming the suitability of the adapted indicators for assessing entrepreneurial, innovation, and performance dimensions in Karawo MEs.

To assess discriminant validity, the square root of the average variance extracted (AVE) was compared with the correlations between the focal construct and all other constructs. This was achieved by using the matrix’s skewed diagonal, as illustrated in Table 3. The values exceed the correlation coefficients, thereby indicating that discriminant validity is satisfactory (Fornell & Larcker, David, 1981).

Table 3
Fornell-Larcker discriminant validity

Constructs	BP	EO	MI	MO	MSC
BP	0.894
EO	0.238	0.772
MI	0.659	0.29	0.811
MO	0.642	0.145	0.651	0.873
MSC	0.634	0.159	0.68	0.655	0.821

Effect of EM on BP

As shown in Table 4, the results of H1b indicate that EO does not have a statistically significant direct effect on BP (β = 0.068, p > 0.05), suggesting that the data do not provide sufficient evidence to reject the null hypothesis. This does not imply that EO has no effect, but rather that the effect could not be confirmed with the current sample size. Meanwhile, the results for H1a show that MO has a statistically significant positive effect on BP (β = 0.375, p < 0.05), supporting H1a.

Table 4
Direct, mediating, and moderating effects testing

Path	β	T statistics	P values	Ket.
MO → BP	0.375	5.363	0.000	sig.
EO → BP	0.068	0.94	0.347	not sig.
MO → MI	0.33	4.495	0.000	sig.
EO → MI	0.167	3.257	0.001	sig.
MI → BP	0.395	5.194	0.000	sig.
MSC → MI	0.402	5.587	0.000	sig.
EO → MI → BP	0.066	2.431	0.015	sig.
MO → MI → BP	0.13	3.413	0.001	sig.
MSC x EO → MI	0.064	0.897	0.37	not sig.
MSC x MO → MI	0.065	1.983	0.047	sig.

Effect of EM on MI

The results of H2a indicate that MO has a significant positive effect on MI (β = 0.33, p < 0.05), thus supporting H2a. The results of H2b indicate that EO has a significant positive effect on BP (β = 0.167, p < 0.05), thus supporting H2b. Therefore, H2a and H2b are accepted, thus supporting H2.

MI Mediation Effects

To examine the mediating role of Marketing Innovation (MI) between Entrepreneurial Marketing and Business Performance (BP), this study adopted the three-step mediation procedure proposed by (Baron & Kenny, 1986). The results show that MO has a significant direct effect on BP (β = 0.375, p < 0.001), whereas EO does not (β = 0.068, p = 0.347). Both MO and EO significantly influence MI (MO → MI: β = 0.33, p < 0.001; EO → MI: β = 0.167, p = 0.001), while MI significantly affects BP (β = 0.395, p < 0.001), indicating its mediating role.

Bootstrap analysis with 5,000 resamples confirms that MI mediates both the MO-BP and EO-BP relationships. The indirect effect of MO on BP through MI is significant (β = 0.13, t = 3.413, p = 0.001), supporting H3a and indicating partial mediation, as both the direct and indirect effects remain significant. Similarly, the indirect effect of EO on BP through MI is significant (β = 0.066, t = 2.431, p = 0.015), supporting H3b and indicating full mediation because the direct EO-BP relationship is not significant.

These findings demonstrate that market-oriented behaviors enhance performance both directly and through marketing innovation, whereas entrepreneurial orientation contributes to performance only when translated into innovative marketing practices. Overall, the results confirm the central role of Marketing Innovation in transforming strategic orientations into business performance outcomes among Karawo MEs. Therefore, H3, H3a, and H3b are supported.

Moderating effect of MSC

In addition, this study evaluates the moderating role of Market Sensing Capability in the relationship between Entrepreneurial Marketing and Marketing Innovation. H4 proposes that MSC strengthens the EM-MI relationship, with H4a and H4b examining its moderating effects on the MO-MI and EO-MI relationships, respectively.

The results provide partial support for H4. The interaction effect between MSC and MO on MI is significant (β = 0.065, t = 1.983, p = 0.047), supporting H4a. This finding indicates that firms with stronger market sensing capability are better able to translate market orientation into marketing innovation. In contrast, the interaction effect between MSC and EO on MI is not significant (β = 0.064, t = 0.897, p = 0.370), providing no support for H4b. This suggests that the influence of entrepreneurial orientation on marketing innovation does not depend significantly on market sensing capability in this context.

Overall, the findings support H4a but not H4b, indicating that MSC strengthens the MO-MI relationship but not the EO-MI relationship. These results highlight the importance of embedding sensing mechanisms within market-oriented strategies to enhance innovation in traditional creative industries such as Karawo MEs.

Table 5 summarizes the hypotheses and results regarding the relationships among Entrepreneurial Marketing, Marketing Innovation, Business Performance, and Market Sensing Capability in Karawo weaving MEs.

Table 5
Summary of hypotheses and results

Hypothesis Code	Statement	Result
H1a	MO has a positive effect on BP	Supported
H1b	EO has a positive effect on BP	Not Supported
H2a	MO has a positive effect on MI	Supported
H2b	EO has a positive effect on MI	Supported
H3a	MI acts as a mediator between MO and BP	Supported (Partial Mediation)
H3b	MI acts as a mediator between EO and BP	Supported (Full Mediation)
H4a	MSC moderates the relationship between MO on MI	Supported
H4b	MSC moderates the relationship between EO on MI	Not Supported

DISCUSSION

This study proposes a research model grounded in Resource-Based Theory and Dynamic Capability Theory to examine the relationships among Entrepreneurial Marketing, Marketing Innovation, Market Sensing Capability, and Business Performance. The findings are context-specific, reflecting the realities of Karawo MEs in Gorontalo, Indonesia, which operate in a socio-cultural environment marked by artisanal production, trust-based marketing, and demand fluctuations linked to ceremonial and seasonal cycles. Therefore, the generalizability of the findings should be considered in light of contextual similarity.

Rather than seeking universal generalizations, this study provides empirical insights into how heritage-based MEs transform entrepreneurial and market-oriented capabilities into innovation and performance outcomes. The interaction between internal strategic resources and sensing capabilities reveals a distinctive pattern of adaptation shaped by cultural, structural, and operational constraints. Consequently, the study contributes to the literature by explaining how traditional MEs in informal economies navigate uncertainty, leverage marketing innovation, and use sensing capabilities to enhance competitiveness and resilience.

Theoretical contribution

This study contributes to the literature on entrepreneurial marketing, innovation, and firm performance, particularly within heritage-based MEs in emerging economies. First, it provides empirical evidence that Entrepreneurial Marketing, operationalized as Market Orientation and Entrepreneurial Orientation, influences Business Performance. By positioning Marketing Innovation as a mediator, the study advances understanding of how strategic orientations translate into performance outcomes in informal and resource-constrained settings.

Second, the study extends Resource-Based Theory by integrating Dynamic Capability Theory to explain the contingent role of Market Sensing Capability (MSC). The findings show that MSC strengthens the effect of Market Orientation on Marketing Innovation, supporting the view that firms require both valuable internal resources and adaptive sensing capabilities to respond to market changes. However, MSC does not significantly moderate the Entrepreneurial Orientation-Marketing Innovation relationship, suggesting that entrepreneurial initiatives in Karawo micro-enterprises remain largely intuition-based and socially embedded rather than driven by systematic market intelligence. This finding highlights the contextual limitations of sensing capability in highly informal and tradition-oriented environments and enriches the dynamic capability perspective by demonstrating its conditional role in translating market orientation into innovation.

Furthermore, the study contributes to the literature by demonstrating that EO influences performance only through MI, whereas MO affects performance both directly and indirectly. The significant effect of Market Orientation on Business Performance suggests that Karawo micro-enterprises rely heavily on customer understanding and relational responsiveness to sustain competitiveness in culturally embedded markets. Unlike large firms that compete on scale or technology, these enterprises depend on close customer interactions and adaptation to ceremonial demand patterns. This finding supports prior studies emphasizing the importance of customer-centric behavior in resource-constrained firms (Buccieri & Park, 2022).

Interestingly, Entrepreneurial Orientation does not directly influence Business Performance. This finding indicates that entrepreneurial behaviors such as experimentation, proactivity, and risk-taking may not automatically translate into measurable performance outcomes in traditional microenterprises. In the Karawo context, entrepreneurial initiatives often remain informal and disconnected from structured market execution. Consequently, entrepreneurial orientation contributes to performance only when translated into concrete marketing innovation activities. This finding is partially at odds with studies reporting a direct EO-performance relationship (Adel et al., 2020) but aligns with arguments that innovation capability serves as a necessary mechanism for transforming entrepreneurial intent into firm outcomes (Sadiku-Dushi et al., 2019). This distinction provides a theoretical refinement of the EM construct, suggesting asymmetric paths through which different orientations impact performance. By disaggregating EM into MO and EO and examining their respective mediating and moderating mechanisms, this research adds depth to the strategic marketing discourse in MEs.

Importantly, the empirical model is grounded in Karawo MEs, a culturally embedded textile industry in Gorontalo, Indonesia. These MEs operate using artisanal methods, informal marketing systems, and cyclical demand patterns. By situating the study in this unique setting, the research contributes localized theoretical insight into how strategic orientation, innovation, and sensing capabilities operate in non-Western, heritage-based, and informally governed business ecosystems. These contextual contributions enhance the external validity and cultural relevance of the findings when applied to micro-enterprises in developing economies.

Managerial implications

This study provides practical insights for ME owners, policymakers, and development stakeholders in heritage-based industries such as Karawo weaving in Gorontalo. The findings suggest that improving business performance requires not only valuable internal resources but also their effective deployment through marketing innovation and market-sensing capability. Market Orientation and Entrepreneurial Orientation should be viewed as complementary dimensions of Entrepreneurial Marketing, each with a distinct strategic role.

MEs should strengthen market-oriented practices by understanding customer needs, maintaining customer focus, and responding quickly to market opportunities. Strong market-sensing capabilities enable these practices to help firms develop relevant marketing innovations. Owners are encouraged to establish routines for collecting market feedback, monitoring competitors, and communicating new product designs, particularly in culturally driven markets with seasonal demand patterns.

The findings also indicate that Entrepreneurial Orientation contributes to performance only when it translates into marketing innovation. Accordingly, entrepreneurial initiatives should be translated into tangible innovations in branding, product design, pricing, and promotion. Training and mentoring programs should therefore emphasize not only creativity but also practical marketing capabilities that help artisans differentiate their products in competitive markets.

In addition, Market Sensing Capability strengthens the impact of Market Orientation on Marketing Innovation, suggesting that even resource-constrained firms can gain competitive advantages by being more responsive to market changes. Local governments and support institutions can facilitate this capability by improving access to market information, trend monitoring, and customer intelligence tools.

For Karawo MEs, integrating market orientation, sensing capabilities, and marketing innovation offers a path to sustainable competitiveness. Stakeholders should support both cultural preservation and commercial revitalization by adopting more professional marketing practices and systematic market sensing, enabling firms to adapt to shifting customer preferences while maintaining cultural authenticity.

CONCLUSIONS

This study examined the relationships among Entrepreneurial Marketing, Marketing Innovation, Market Sensing Capability, and Business Performance in Karawo weaving micro-enterprises in Gorontalo, Indonesia. The findings show that Market Orientation positively affects Business Performance both directly and indirectly through Marketing Innovation, indicating partial mediation. In contrast, Entrepreneurial Orientation influences Business Performance only indirectly through Marketing Innovation, reflecting full mediation. Market Sensing Capability strengthens the relationship between Market Orientation and Marketing Innovation but does not significantly moderate the Entrepreneurial Orientation-Marketing Innovation relationship. These findings support Resource-Based Theory by confirming the role of internal strategic capabilities in enhancing firm performance and align with Dynamic Capability Theory by emphasizing the importance of sensing and adaptive capabilities in dynamic markets. The study contributes to the entrepreneurial marketing literature by demonstrating that Market Orientation and Entrepreneurial Orientation influence performance through different innovation pathways. For heritage-based micro-enterprises, the findings highlight the importance of combining entrepreneurial behavior, market responsiveness, and adaptive innovation capabilities to enhance competitiveness and sustainability. Future research may examine similar models in other cultural and creative industries across different contexts to improve external validity. Additional studies may also incorporate other dynamic capability variables, such as digital capability, social capital, or collaborative networks, and apply longitudinal or multi-group approaches to capture changes in entrepreneurial and innovation behavior over time.

Open Data:

The contents underlying the research text are included in the manuscript.

Appendix 1

Please indicate the extent of your agreement or disagreement. (from 1 “strongly disagree” to 5 “strongly agree”).

Part 1: Entrepreneurial marketing

Market Orientation

• X11. My microbusiness is often the first to market.

• X12. My microbusiness remains committed to serving customer needs.

• X13. My microbusiness is more customer-focused than its competitors.

Entrepreneurial Orientation

• X21. My microbusiness’s marketing efforts tend to be low risk.

• X22. My microbusiness often uses creative, low-cost methods to mitigate risk.

• X23. My microbusiness contributes ideas to create value for customers.

• X24. My microbusiness uses connections (friends and business partners) to gain cost-effective access to information.

• X25. My microbusiness collaborates with other microbusinesses to save on marketing costs.

• X26. My microbusiness continually strives to develop new products that entice customers to reconsider their purchase intentions.

• X27. My microbusiness consistently develops new and improved marketing concepts.

Part 2: Marketing innovation

• Z1. My microbusiness continuously improves its product design.

• Z2. My microbusiness’s product designs are easily accepted by customers.

• Z3. My microbusiness maintains competitive pricing.

• Z4. My microbusiness’s products are reasonably priced, commensurate with the quality offered.

• Z5. My microbusiness regularly updates the layout of its Karawo fabric products to attract more customers to its retail outlets.

• Z6. My microbusiness offers attractive discounts to customers.

• Z7. My microbusiness uses various media to promote our products (Facebook, Instagram, TikTok).

Part 3: Market sensing capability

• M1. My micro-business frequently gathers information from Google to predict market needs.

• M2. My micro-business uses the information gathered from Google to improve its Karawo fabric business.

• M3. My micro-business always anticipates competitors’ actions.

• M4. My micro-business regularly broadcasts WhatsApp messages to inform customers about our new products.

• M5. My micro-business maintains a customer database to promote Karawo fabric.

Part 4: Business performance

• Y1. My micro-business has seen increased sales.

• Y2. My micro-business has seen increased profits.

• Y3. My micro-business has retained customers using Karawo fabric products.

• Y4. My micro-business has increased customer loyalty.

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Correspondence

Correspondence concerning this article should be addressed to Melda Gienardy, Dewi Sartika St., 64, Karaton, Luwuk, Central Sulawesi, Indonesia. ZIP code: 94715. E-mail: [e-mail]

EDITORIAL BOARD

Editor-in-chief

Almir Martins Vieira

Associated editor

Helena Belintani Shigaki

Technical support

Vitória Batista Santos Silva

EDITORIAL PRODUCTION

Publishing coordination

Andréia Ferreira Cominetti

Editorial Intern

Sofia Lelis Luiza Oliveira

Language editor

Bardo Editorial

Layout designer

Libro

Graphic designer

Libro

Publication Dates

• Publication in this collection
  05 Oct 2026
• Date of issue
  2026

History

• Received
  21 Aug 2025
• Accepted
  08 June 2026