Peer-to-Peer lending, financial bootstrapping and government support: The role of innovation mediation on MSME performance

Abstract

This study aims to examine whether Peer-to-Peer (P2P) lending, financial bootstrapping and government support affect the performance of Micro, Small, and Medium-sized Enterprises (MSMEs) by adding a mediating variable in the form of innovation. Innovation mediation is expected to be able to optimize the influence of government funding and incentives towards improving business performance. This study used an SEM-PLS analysis technique. The study samples were the MSMEs located in the city of Salatiga - Central Java, Indonesia. The results showed that P2P lending and financial bootstrapping had a positive effect on business performance and innovation. While government support had a positive effect on innovation, on the one hand, it had no effect on business performance, on the other. Innovation itself is proven to have an influence on business performance. This study also finds that innovation mediates the effect of P2P lending on business performance, facilitates the effect of financial bootstrapping on business performance and reconciles the effect of government support on business performance.

Does Entrepreneurial Financial Support Guarantee New Ventures’ Performance via Competitive Advantage and Innovation? Empirical Answers from Ho Chi Minh City Region, Vietnam

“…HCMC has enforced the project "Assistance policies on creative and innovative entrepreneurial ecosystem in HCMC period 2021-2025" to develop an innovative entrepreneurial ecosystem for promoting new ventures [5]. However, starting in 2020, fluctuations emerged within the community and the economic environment because of the COVID-19 pandemic [6]. COVID-19 generated an uncertain and chaotic business climate and adversely influenced the long-term sustainability of new ventures, intimidating the sustainable business networks and economies of various regions [7].…”

“…In addition to that, the percentage of successful startups was 5 percent, while startups that experienced losses accounted for 37 percent [11]. These pessimistic consequences can be traced back to the negative circumstance of external resources, FIN [6,9,[12][13][14], and internal resources, INO [15][16][17]. To overcome these issues, enterprises consider the competitive advantages of sustainability in business and apply innovation that is the core of sustainable value creation of new ventures [7,[18][19][20][21][22].…”

“…According to the resource-based view (RBV) theory, the sustainable FCA and firm performance of an organization are dependent on the organizational possession of both external and internal resources and capabilities that are valuable, rare, inimitable, and non-substitutable [40,41]. Previous studies on FIN focused on external resources that significantly and positively contribute to FiPer and BOP across countries [6,9,[12][13][14]. Due to the COVID-19 pandemic, the availability and adequacy of FIN are essential external resources for new ventures in achieving a better competitive position in the market and enhance firm performance [6].…”

“…Previous studies on FIN focused on external resources that significantly and positively contribute to FiPer and BOP across countries [6,9,[12][13][14]. Due to the COVID-19 pandemic, the availability and adequacy of FIN are essential external resources for new ventures in achieving a better competitive position in the market and enhance firm performance [6]. Specifically, Jayeola et al [9] demonstrated that the external resources obtained through FIN, which is acknowledged as an external mechanism by the RBV theory, facilitated more rapid economic growth for enterprises in gaining a stronger FCA and consequently enhanced new ventures' firm performance during the COVID-19 pandemic.…”

“…INO is the trademark of entrepreneurs and their new ventures, especially when they act toward uncertain circumstances such as the COVID-19 pandemic. Therefore, they utilize an innovative perspective to produce essential products and technological skills to improve their firm performance [6]. Hence, during the COVID-19 pandemic, the development of INO helped new ventures to generate innovative procedures, which offered novel products and services and promoted their growth in the market, thus positively facilitating both FiPer and BOP [45,46].…”