Unlocking the power of endogenous factors for small business success. The role of knowledge management towards innovation

Small businesses play a crucial role in the economic development of both developed and developing countries. The purpose of this study is to gain a deeper understanding of the relationship between knowledge management and innovation, and how it can be leveraged to enhance the innovativeness of small businesses. Innovativeness of small business refers to the level of innovation exhibited by small businesses. Innovation in this context can encompass various aspects such as the development and introduction of new products or services, the implementation of new processes or technologies, the adoption of innovative business models, or the creation of novel solutions to address market needs or challenges. This study employed a cross-sectional research design with a quantitative approach, conducting surveys among small businesses to collect data on knowledge management practices and innovativeness, analyzed through regression and path analysis to determine influential factors. The study indicated that factors such as technology utilization, social capital, and knowledge management as mediating variables, entrepreneurial behavior, and personality of owners affected the innovativeness of small businesses. Additionally, the study identified knowledge management as mediating the effects between technology utilization and innovativeness as well as the relationship between social capital and innovativeness of small businesses. All the effect relationships were statistically significant except the direct relationship between technology utilization and the innovativeness of small businesses. To foster innovativeness in small businesses, policymakers should emphasize initiatives that promote knowledge management practices and facilitate the development of social capital among entrepreneurs, recognizing these as crucial factors in enhancing the ability of small businesses to innovate and contribute to economic growth.