Business Strategy on MSME Performance: The Role of Innovation and Accounting Information System as Mediating Variables

Abstract

Micro, Small, and Medium Enterprises (MSMEs) play a vital role in economic growth, employment creation, and income distribution. However, MSMEs in Pati Regency, Indonesia, continue to face challenges related to strategic planning, innovation capability, and the utilization of accounting information systems (AIS). This study examines the effects of business strategy, innovation, and AIS on MSME performance and investigates the mediating roles of innovation and AIS in the relationship between business strategy and performance. A quantitative survey approach was employed using data collected from 100 MSME owners selected through purposive sampling. The data were analyzed using multiple linear regression and mediation analysis with the Sobel test. The findings reveal that business strategy has a positive but insignificant effect on MSME performance. In contrast, innovation and AIS have positive and significant effects on performance. Furthermore, the mediation analysis indicates that neither innovation nor AIS significantly mediates the relationship between business strategy and MSME performance. These results suggest that the innovation capability and AIS utilization among MSMEs in Pati Regency remain relatively underdeveloped and have not yet been effectively integrated into strategic business practices. This study highlights the importance of strengthening innovation capabilities and expanding the adoption of digital-based accounting information systems to improve business performance. MSME owners are encouraged to enhance product, process, and marketing innovation while utilizing AIS more effectively to support managerial decision-making and operational efficiency.