The Effect of Management Capabilities and Entrepreneurship Orientation to Innovation and Implication on Business Performance: Study at Embroidery Motifs SMEs in Aceh-Indonesia

This study aims to examine and explain the effect of Management Capabilities and Entrepreneurship Orientation to Innovation and Implication on Business Performance: Study at Embroidery Motifs SMEs in Aceh-Indonesia. Survey respondents are 50 owners of Embroidery Motifs SMEs in Aceh. Structural Equation Modeling (SEM) applied to test the model that has been previously formed and at the same time examine all the hypotheses. The research found that innovation proved affect positively and significantly toward business performance improvement. Innovation becomes complete mediation in relationship between management capabilities and entrepreneurship orientation toward business performance. An important finding of this study is be able to integrate the affect of entrepreneurial orientation and management capabilities toward business performance through innovation as a mediating. Key word: Entrepreneurial Orientation, Management Capabilities, Innovation, Business Performanc