Purpose This study aims to investigate the ways that human capital influences the strategic orientation variables entrepreneurial orientation (EO) and market orientation (MO), which ultimately leverage the firm performance of small and medium enterprises (SMEs) in Indonesia. Design/methodology/approach This study used a quantitative method with a total of 274 SMEs in the Regency of Gresik, East Java, Indonesia, as the observable population. Furthermore, the identified samples obtained through the random sampling technique were determined using the Slovin formula with 163 SMEs used for analysis. As the means of analysis, this study used a statistical approach by using PLS-SEM statistics from SmartPLS software. This analytical tool has been proven to be a robust statistical tool that has been used in many marketing studies. Findings This study found that human capital is a key determinant of EO and MO as strategic orientations of SMEs. Furthermore, this study highlighted that SMEs’ strategic orientations (i.e. EO and MO) provide a valuable thrust that leverages firm performance. Moreover, the role of human capital in leveraging firm performance was found to be significant with the role of the joint effect of EO and MO as mediator. This implies that human capital is not solely a single determinant that leverages SMEs’ performance. Research limitations/implications There are few aspects of limitations in this research that could be enhanced by other scholars in the discipline of entrepreneurship. First, the strategic orientation concept being indicated by EO and MO had yet to provide a comprehensive view of strategic orientation. Second, this research used samples that represent the traditional furniture cluster in East Java and had yet to explore other clusters such as food processing and services cluster which may be relevant to the context of SMEs in Indonesia. Practical implications As a practical implication, this study would benefit policymakers in Indonesia, such as the Ministry for Cooperatives and SMEs to provide assistance to SMEs to progressively nurture capacity-building through formal and informal education to leverage human capital. Moreover, it could benefit other relevant businesses, such as national banks in Indonesia whose interests are significant, especially in providing financial access to SMEs in Indonesia. Social implications The social implication of this research lay the focus on the suggestion by which SMEs must be able to optimize their capabilities by enhancing levels of human capital particularly for traditionally managed SMEs. The ability to survive external pressures for would be able to contribute to the social well-being of their society as many people are dependent heavily in the operation of the SMEs. Originality/value The significance of this study is twofold. Although the use of human capital as a determinant of firm performance has been discussed in the literature, few studies to date has sought to predict human capital with EO and MO as mediators of firm performance. Furthermore, the joint impact of EO and MO as a strategic orientation needs to be holistically explored and explained, particularly in an emerging economy context.

Small and medium enterprises (SMEs) have a very important role in the Indonesian economy. The existence of SMEs in Indonesia is strongly influenced by several factors including those offered by the market and corporate governance. Good corporate governance is an important thing that supports business sustainability. Implementation of corporate governance for SMEs involving entrepreneurs compliance to government regulations, such as regulations related to taxation. Indonesia implement self-assessment system in terms of tax payments and tax reporting. It is confirms that corporate governance and the fulfillment of tax obligations are closely interrelated. Data is collected by interview using in depth interview technique. The results show that business owners have not applied the good corporate governance code for SMEs which prove that tax compliance has not been implemented properly. Based on tax obligation indicators, this study reveal that SMEs implement tax obligations on NPWP ownership, but have not performed other obligations, namely tax payment and reporting.

This study discusses the Regional Innovation System by identifying the policies that benefit the roles of SMEs in counter-measuring poverty in the region as well as the factors that are influencing the change pattern of policies for the roles of SMEs towards poverty alleviation. A qualitative method was used in the research by drawing cases from five different rural areas in East Java Province, Indonesia. The study concludes that Regional Innovation System as a joint regulation is still considered foreign by local governments. However, the study indicates a presence of different actors involved in synergizing the implementation of several MSMEs empowerment programs. Furthermore, four factors that influence the change pattern of policies for the roles of SMEs towards poverty alleviation were identified; however, RIS as a countermeasure for poverty has yet shown to be executed in a consistent, systematic and neat fashion. Recommendations from this study are that the needs for improvement in communication networks and distribution of equal information for each level of government agency are essential and so are the needs for improvement of the policies' evaluation system.