* Corresponding author. E-mail address: enni.savitri@lecturer.unri.ac.id (E. Savitri) © 2021 by the authors; licensee Growing Science, Canada doi: 10.5267/j.msl.2021.3.014 Management Science Letters 11 (2021) 2301–2312 Contents lists available at GrowingScience Management Science Letters homepage: www.GrowingScience.com/msl Can innovation mediate the effect of adaptability, entrepreneurial orientation on business perfor- mance? Enni Savitri a* , Emrinaldi Nur DP a and Almasdi Syahza b a Faculty of Economics and Business, Universitas Riau, Indonesia b Faculty of Teachers Training and Education, Universitas Riau, Indonesia C H R O N I C L E A B S T R A C T Article history: Received: December 25, 2020 Received in revised format: January 25 2021 Accepted: March 29, 2021 Available online: March 29, 2021 Business performance is one of the entrepreneurial behavior benchmarks. Small, and Medium Enterprises (SMEs) are required to have dynamic capabilities and strategies that can seize opportunities and improve the market. The aim of this paper is to analyze the effect of adaptability and entrepreneurial orientation on business performance through innovation as mediation. Based on interviews and questionnaires distributed to 115 SMEs in coastal areas. The research results show that adaptability and entrepreneurial orientation have effects on innovation. Adaptability and entrepreneurial orientation have no effects on business performance. Innovation has effects on business performance. Adaptability and entrepreneurial orientation have effects on business performance through innovation as mediation. This study enriches the current literature by providing a contribution and insights to understanding how Resources Based View (RBV) theory affects business performance and innovation on SMEs in coastal areas in Indonesia. The implications of this study on entrepreneurship orientation in SMEs will help to increase resources for innovation. This emphasizes how the RBV approach used in this research helps improve business efficiency by leveraging existing capital in microbusinesses into a source of excellence. The government is working on policies to enhance the efficiency of SMEs in Indonesia. © 2021 by the authors; licensee Growing Science, Canada Keywords: Adaptability Entrepreneurial Orientation Innovation Business Performance 1. Introduction Small, and Medium Enterprises (SMEs) play a significant role in the development of the economy (Venancio & Pinto, 2020), especially in terms of the aspects relating to creating employment opportunities, equal income distribution, development of the rural economy, and non-oil and gas exports. Nowadays, the pressure of global business competition as well as other factors such as technological development, demographic and social change, innovation ability, financial support, and entrepreneurship, have affected SMEs. Therefore, SMEs should have dynamic capabilities and strategy to seize business opportunities and improve the market. The success of a business is determined by its performance (Savitri et al., 2020). The business performance shows the company's level of achievement in a certain period (Wheelen & Hunger, 2015). Many factors affect the company performance such as entrepreneurial orientation (Gupta & Batra, 2016; Veselovsky et al., 2019), adaptability culture (Umrani et al., 2017; Ngo & Loi, 2008), and innovation (Rangus & Slavec, 2017; Terziovski, 2010; Ha et al., 2020; Snieška et al., 2020). Other factors that also affect the company performance are business strategy, human resource management, entrepreneur characteristics, and the business itself. However, research that emphasizes the mediating role of innovation on the relationship between adaptability and entrepreneurial orientation toward SME performance has not been