Abstract

This study tested a model of factors affecting the innovativeness of small and medium enterprises (SMEs) in the five southern border provinces using structural equation modeling. Data on innovativeness and its hypothesized antecedents were collected using questionnaires that were mailed to a study sample of 283 entrepreneurs in SMEs in the five southern border provinces. The fit indices showed that the proposed model had a good fit (χ² = 207.99, df = 96, GFI = 0.92, p <.001, RMSEA = 0.064, 90% RMSEA = 0.052–0.076, NNFI = 0.97, CFI = 0.98 and SRMR = 0.051). Learning orientation and proactiveness had direct effects on innovativeness, with significant path coefficients of 0.30 and 0.63, respectively. Networking and risk-taking showed indirect effects on innovativeness with path coefficients of 0.63 and 0.48, respectively. The research results can be used to set the guidelines for entrepreneurs to build innovativeness in their enterprises by creating a learning culture/behavior in the organization, building proactiveness, creating a business network with government and the private sector, as well as having courage to take risks when there is an opportunity.