Author(s): Rahayu Puji Suci, Teddy Chandra
The paper analyzes the direct impact of entrepreneurial orientation and environmental dynamics on business performance through studying the performance of SMEs into the business of embroidery. The population of the research comprises of the owners and the managers working with the SMEs in East Java, Indonesia. There is a total of 4,180 business units of various embroidery SMEs in 22 cities and districts in East Java. Researchers have divided the sampling method into 2 stages. The first stage is a sampling method that is based on a criterion that SME should employ a minimum of 100 embroidery craftsmen. Based on these criteria, the regencies that meet these requirements are Pasuruan, Lamongan, Gresik, Bojonegoro, and Tulungagung with a total of 3608 SMEs. Then, the Cochran formula was used to determine the sample size obtained by 360 SMEs. Data was collected by distributing questionnaires to respondents. The Partial Least square model is used in testing research hypotheses. The research findings found entrepreneurial orientation and confusion dynamics have a negative effect on business performance but positively influence business strategy. Then the business strategy has a positive influence on business performance. This research recommends that in dealing with global economic problems due to COVID-19, Embroidery SMEs actors enhance their entrepreneurial orientation in facing current environmental dynamics by improving strategies with the help of technology and professional tools that are available today. Thus, business actors can determine work priorities, monitor, and evaluate jobs that have been carried out within a certain period, thereby improving business performance.