Factors Influencing SME Growth a Structural Analysis Using SmartPLS

Abstract

Small and Medium Enterprises (SMEs) play a crucial role in the economic development of both developed and developing countries. Despite their importance, SMEs frequently face numerous challenges that hinder their growth and sustainability, such as limited access to finance, inadequate infrastructure, and insufficient managerial skills. This study aims to identify and analyze the factors that influence the growth of SMEs in Tangerang using a structural equation modeling approach with SmartPLS. A quantitative research design was employed, utilizing a stratified random sampling method to survey 300 SME owners and managers across various sectors in Tangerang. Data were collected through structured questionnaires measuring access to finance, innovation capability, entrepreneurial orientation, market orientation, and SME growth. The data were analyzed using SmartPLS to evaluate the measurement and structural models. The findings reveal that access to finance (β = 0.35, p < 0.001), innovation capability (β = 0.28, p < 0.001), entrepreneurial orientation (β = 0.32, p < 0.001), and market orientation (β = 0.30, p < 0.001) significantly and positively influence SME growth. The model explained 62% of the variance in SME growth, indicating a good model fit. The study concludes that enhancing access to finance, fostering innovation, promoting entrepreneurial orientation, and strengthening market orientation are essential for the sustainable growth of SMEs. The findings offer practical recommendations for policymakers, business practitioners, and SME owners to develop targeted strategies and policies to support SME growth.