The effect of entrepreneurial orientation and knowledge management on organizational performance through innovation

This study aims to examine the effect of entrepreneurial orientation, knowledge management


Introduction
The current economic development in Indonesia has an effect on business actors, who must continually adapt to the ever-increasing demands for change. Along with these developments, cooperatives are one of the sectors that can sustain economic strength and carry out various activities in the order of economic life. Ass one of the business entities, cooperatives are expected to respond to competition and market developments. According to Law No.1992, a cooperative is a business entity made up of individuals or legal entities that bases its activities on cooperative principles and a people's economic movement based on family principles. Cooperatives play a role as a business network driver based on improving services to the community; besides that, cooperatives play a role in building a national economic order to improve the welfare of members and society in general (Pakaya, 2017). To maintain and improve cooperative services in various regions of Indonesia, the role of human resources who have reliable insight and knowledge about cooperatives is needed. 79 to 759 in 2020. The decline also occurred in the amount of own capital, external capital, and business volume, as well as the remaining results of operations (BPS, 2022).
Consumer or consumption cooperatives were formed to meet the daily needs of members and the community (Siregar, 2020). In addition to competition among cooperatives, the proliferation of modern retail stores in Malang City adds to the fierce competition for meeting daily needs. As a result, the Malang City government issued a regional regulation in 2019 to control the establishment of modern retail stores, which are increasingly proliferating in Malang City. The fact that various cooperative data are declining explains why improving cooperative performance in Malang City through targeted cooperative development programs is still very much needed. However, the performance of the organization is dependent on the performance of its employees (Gibson, 2003). Increasing the ability of members to carry out their roles as cooperative members is one of the objectives of the coaching program. Performance is the key word in achieving organizational goals, so companies must improve the performance of individual employees (Istijanto, 2006).
Members' insights and skills are expected to improve cooperative performance. Empirical evidence indicates that entrepreneurial orientation has a direct relationship with improved organizational performance. Rofiaty (2019) discovered that entrepreneurial orientation in an organization could trigger innovations that meet needs and have an impact on a company's competitive advantage. Understanding entrepreneurial orientation and studying its characteristics can have an impact on business performance (Mustari et al., 2021). Based on this explanation, cooperative administrators and managers must be able to make adjustments as the driving force of cooperative business entities. In this case, management must undergo a paradigm shift, with the social community paradigm giving way to a professional business paradigm (Yanti, 2019). Therefore, entrepreneurial orientation is key in facing increasingly fierce competition.
Another factor that affects organizational performance is knowledge management. (Mills dan Smith, 2011) discovered that understanding the rules used in carrying out tasks and applying relevant knowledge to create value are two aspects of knowledge management that can give birth to innovation and influence the improvement of organizational performance. Furthermore, knowledge management is a set of processes that convert data and information into useful knowledge for a variety of organizational purposes (Zack et al., 2009). The existence of cooperative members and various other supporting institutions provides ample data and information for learning from mistakes and experiences.
In addition to this phenomenon, there are inconsistencies in research results from previous studies. Several studies have been conducted regarding the relationship between entrepreneurial orientation and organizational performance and have shown significant positive results. In this case, entrepreneurial orientation will help organizations do innovative thinking, enter the market, and take risks which will ultimately help MSMEs to become market leaders (Jia et al., 2016;Jannah et al., 2019;Mustari et al., 2021). However, some studies show that risk-taking tendencies in entrepreneurial orientation do not affect financial business performance and non-financial performance (Cho dan Lee, 2018). In addition (Abu Hassan et al., 2016;Puryantini et al., 2017;Rofiaty, 2019) also convey that the relationship between knowledge management and organizational performance shows significant results. By applying the right knowledge management process and according to needs, companies can innovate to continue to grow. However, it differs from Afqarina dan Dihan (2019) dan Sintaasih et al., (2011) which show that knowledge management has an insignificant relationship with organizational performance.
In light of the background description, as well as the phenomena and research gaps discovered, other variables must be predicted in order to address the inconsistency in the relationship between entrepreneurial orientation and knowledge management on organizational performance. The variable innovation acts as a moderator to address the inconsistent direct effect. Innovation is an important mechanism to become more competitive and survive globally (Slaman and Storey, 2002). The innovations created have strategic advantages: eliminating costs, new product differentiation, service development, and quality improvement (Yesil et al., 2013). Innovation is important in improving organizational performance and can increase economic growth and development (Abghim et al., 2013). Cooperative members consisting of diverse backgrounds have the potential to develop cooperative business entities that are oriented towards entrepreneurship and accompanied by knowledge management in making various innovations. Member meetings are expected to be a gathering point for new ideas in order to maintain the organization's sustainability and ability to compete with other cooperatives or companies.
This study aims to investigate "The Effect of Entrepreneurial Orientation and Knowledge Management Mediated by Innovation on Organizational Performance" using existing data and research gaps.

Organizational Performance
Performance is the outcome of personal, team, or organizational efforts in carrying out tasks, responsibilities, or organizational goals. According to Bastian (2001), performance is a description of the level of achievement of an activity, program, or policy in realizing the organization's goals, objectives, vision, and mission, as stated in the formulation of the strategic planning scheme. Performance measurement is a management tool used to improve the quality of decision-making and accountability, and performance measurement is also used to assess the achievement of goals and objectives (Susetyo, (2014).

Entrepreneurship Orientation
According to Echols and Shadily (2001), entrepreneurship is defined as a good or talented person recognizing new products and determining new production methods. Entrepreneurial orientation is a strategic orientation that reflects innovation, proactivity, and the willingness to take risks, all of which are critical for the institution's growth and performance (Fairoz, 2010). Entrepreneurial orientation, as reflected in an attitude of innovation, proactivity, and risk-taking, is thought to improve organizational performance. Entrepreneurial orientation plays a role in improving performance. Every member of the organization must be able to identify and assess business opportunities from existing resources in order to capitalize on them and take appropriate action to ensure success. Entrepreneurial orientation has a significant impact on organizational performance (Alvarez-Torres et al., 2019). Furthermore, Erista et al. (2020) discovered that entrepreneurial orientation influences company performance.

H1
: Entrepreneurial orientation has a positive and significant effect on organizational performance.

Knowledge Management
Knowledge management is the process of capturing, disseminating, and effectively applying knowledge to improve organizational performance. According to Cummings & Worley (2005), knowledge management is the knowledge possessed by employees that remains and becomes an organizational asset even after they have physically left, and knowledge management allows organizations to learn faster so that they can adapt to changes that occur. According to Stephen P. Robbins and Timothy A. Judge (2015), knowledge management is the ability to work with both individuals and groups by understanding and motivating others. Knowledge management is defined as the process of capturing, disseminating, and effectively applying knowledge to improve organizational performance while emerging as a source of long-term competitive advantage. With the implementation of structured knowledge management, it can increase innovation by utilizing new ideas to create new products or services that can be accepted by customers. Abu Hassan et al. (2016) explain that knowledge management has a positive effect on performance growth and protects knowledge from improper use within the organization. Puryantini et al. (2017) also show that knowledge can increase innovation which leads to optimal organizational performance so as to meet customer needs.

H2: Knowledge management has a positive and significant effect on organizational performance
Innovation innovation is one of the corporations' choices when facing market competition and sustainable management. According to Freeman (2004), innovation is a company's effort to develop, produce, and market new products for the industry using technology and information. Innovation is not limited to objects or manufactured goods; it also includes life attitudes, behavior, or movements toward the change process in all forms of community life (Pervaiz K. Ahmed and Charles D. Shepherd 2010). Innovation is an organization's strategic step to maintain a competitive advantage and improve organizational performance. The concept of innovation refers to the application of new ideas, products, or processes. Innovation enables organizations to develop new technologies and structures in the form of enhanced structural capital (Alrowwad et al., 2020). According to Matekenya dan Moyo (2022), innovation significantly impacts organizational performance, with R&D expenditure and new product introduction chosen as innovation indicators for analysis. According to Arunachalam et al. (2018), three aspects of entrepreneurial orientation (innovativeness, proactiveness, and risk-taking) are the drivers for the development of sustainable product innovation. Prima Lita et al. (2020) found that entrepreneurial orientation influences innovation. The entrepreneurial orientation with an innovative dimension will highlight the market with R&D, applied technology, and leadership. Knowledge management will assist organizations in remaining competitive by sharing information with external partners and understanding competitors' products, services, strategies, and best practices. Afqarina dan Dihan (2019); Beltramino et al. (2020) show that knowledge management affects innovation through new ideas to create new products or services that customers can accept.

H3
: Entrepreneurial orientation has a positive and significant effect on innovation H4: Knowledge management has a positive and significant effect on innovation H5: Innovation has a positive and significant effect on organizational performance Through the application of innovation, entrepreneurial orientation can influence organizational performance. Rofiaty (2019) Entrepreneurship and innovative strategies have proven to be powerful motivators for boarding school administrators to improve organizational performance. Jannah et al. (2019) demonstrate that when entrepreneurial orientation and product innovation are tested concurrently, they affect the performance of MSMEs. Knowledge management in the face of change is critical to an organization's success. Beltramino et al. (2020) show that the relationship between knowledge management and innovation in improving organizational performance has a positive and significant effect. Knowledge management plays an important role in an organization by creating breakthroughs in every process and product that become the organization's competitive advantage over its competitors.

Research and Methodology
This study employs an explanatory research approach to objectively test the theory by examining the relationship between each variable using statistical procedures and a quantitative approach. The population in this study was consumer cooperatives in Malang City. In this study, probability sampling was used with saturation sampling. Saturation sampling restricts sampling to all population (Sekaran dan Bougie, 2020).
This study used 60 Consumer Cooperatives as samples. The sample selection criteria are as follows: Consumer cooperatives in Malang City that have been approved by the Ministry of Cooperatives and SMEs of the Republic of Indonesia. Also, Consumer cooperatives whose businesses include the wholesale trade of various goods, the retail trade of food, the provision of food and drink accommodation, and the provision of other services The study's data is obtained based on survey results and documentation. In the questionnaire submitted, a Likert scale is used to determine the extent to which respondents give their opinions according to a predetermined scale.
The data were analyzed using partial least squares structural equation modeling (SEM-PLS). PLS data analysis is used because the concept is to test the modified results of several research models to provide an overview of the variables under study (Garson, 2016). The entrepreneurial orientation variable in this study is based on indicators developed by Erista et al. (2020)

Finding and Discussion
Cooperatives, according to Law Number 25 of 1992, are business entities comprised of individuals or cooperative legal entities that base their activities on cooperative principles as well as the people's economic movement based on family principles. Malang has 452 cooperatives, with 298 of them being consumer cooperatives. Consumer cooperatives are cooperatives that carry out activities on behalf of their members in the context of providing goods or services. Consumer cooperatives play a role in increasing purchasing power, thereby increasing members' real income. Based on the table above, it shows that the majority of respondents are 36-50 years old (63%), then the majority of the education level is S1 (47%). Furthermore, members who have worked in cooperatives for more than 5 years control the majority of decisionmakers (49%). Respondents in this study were decision-makers in cooperatives, including managers (53%) and managers (47%). The majority of cooperatives examined in this study have been in operation for more than 20 years (76%).

Descriptive Statistic and Correlation
This study uses organizational performance variables, entrepreneurial orientation, knowledge management, and innovation which can be seen in Table 2 along with the results of the average value of respondent answers equipped with the standard deviation of each variable.

Measurement Model Analysis
To test the quality of the data, this study uses convergent validity and discriminant validity tests with the constructs to be measured for the initial research scale development values between 0.50 to 0.60 are values that are considered sufficient (Ghozali & Latan, 2015). In more detail, the results of the validity and reliability tests can be seen in table 3 below.  Table 4 displays the convergent validity test results by looking at the loading factor value of each indicator on the four variables (entrepreneurial orientation, knowledge management, innovation, and organizational performance) that is greater than 0.60 (Hair et al., 2017). Furthermore, by comparing the coefficient value on each variable with the correlation value on each variable relationship in the research model, it can be seen that each root AVE value is greater than 0.50. As a result, it is possible to conclude that the items used in this study are reliable. After the data is tested for validity, then reliability testing is carried out using Cronbach's alpha and composite reliability values. The following are the results of the reliability test in table 4. Based on table 4 above, it can be concluded that the data used in this study are reliable. The threshold value for reliability is 0.70 (Ghozali and Latan, 2015). In table 4 it can be seen that each variable has a Cronbach's alpha and composite reliability value greater than 0.7. So that the items used in this study are reliable.

Structural Model Analysis
The structural model is a model that describes the causal relationship between latent variables that are constructed based on the theory's substance (Abdillah and Hartono, 2015). The PLS structural model is validated by calculating R2 and the path coefficient. By comparing the t-statistic in the smart-pls output to the t-table. First, test the direct effect between entrepreneurial orientation and knowledge management on organizational performance. Then the direct effect between entrepreneurial orientation and knowledge management on innovation and testing innovation on organizational performance. In Figure 1 below, the results of structural model testing are presented with the acquisition of the t-statistic value of each hypothesis The figure above explains the results of the direct effect test. Based on this figure, it can be explained that the effect of entrepreneurial orientation on organizational performance has a significant positive effect (β = 0.141 t = 2.173, p <0.05). In addition, the results of Knowledge management on employee performance have a positive and significant effect (β = 0.583, t = 5.471 p <0.05). Furthermore, the effect of entrepreneurial orientation on innovation is positive and insignificant (β = 0.230, t = 1.400, p>0.05). However, Knowledge management on innovation shows a positive and significant effect (β = 0.571, t = 3.949, p < 0.05), as well as innovation on organizational performance, has a positive and significant effect (β = 0.304, t = 3.462, p < 0.05). Based on this explanation, it can be obtained that the direct testing hypotheses, namely H1, H2, H4, and H5, are accepted, but H3 is rejected. For the results of indirect hypothesis testing can be seen in Table 5 below Table 5 above explains that the indirect test or mediation role of innovation variables between entrepreneurial organizational relationships on organizational performance has a positive and insignificant effect (β = 0.070, t = 1.244, p> 0.05), but innovation successfully mediates Knowledge management on employee performance shows positive and significant results (β = 0.173, t = 2.813, p < 0.05). It can be concluded that hypothesis 6 is rejected and hypothesis 7 in the study is accepted. This can be interpreted that innovation is a partial mediation between knowledge management on organizational performance. The overall PLS structural model was evaluated by calculating the R2 value and path coefficient. The organizational performance variable has an R-square of 0.899. This figure shows that independent variables can influence the organizational performance variable in the form of entrepreneurial organization and Knowledge management and innovation with the amount of predictive power of the model, which is 89.90%.
Entrepreneurial orientation has a significant and positive impact on organizational performance. A growing entrepreneurial orientation has the potential to improve organizational performance. Based on the findings of the data analysis, it is clear that decisionmakers in cooperatives with an entrepreneurial orientation are capable of improving the cooperative's performance. Cooperative decision-makers are proactive and have the courage to take risks that are high enough to improve organizational performance. However, decision-makers in cooperatives are still not given the freedom and authority to act independently. The results of this study are in line with Jannah et al., (2019); Alvarez-Torres et al. (2019), which state that the entrepreneurial orientation variable has a positive and significant effect on the organizational performance variable.
Knowledge management has a significant positive impact on organizational performance. Increasing knowledge management can improve organizational performance. Data analysis results show that decision-makers in the Cooperative on variable indicators of knowledge management can improve the Cooperative's performance. This is demonstrated by the Cooperative's effective collection and application of knowledge. Annual member meetings and other forums for member interaction serve as a forum for information exchange and collection. Regular mentoring and counseling programs also facilitate communication with the cooperative office. Likewise, storing documents and archives owned by cooperatives is a good asset in decision-making. Indicators of knowledge sharing can and need to be improved, especially in sharing knowledge with external parties such as cooperative agencies, consultants, academics, and other stakeholders. The long-standing cooperatives, over 20 years old, are an asset for organizations in collecting, using, and sharing knowledge, which can affect organizational performance. The results of this study are in line with research conducted by Puryantini et al. (2017) that knowledge management variables have a direct positive and significant effect on organizational performance variables.
Increased entrepreneurial orientation has not resulted in increased innovation. According to the findings of the data analysis, decision makers in cooperatives on indicators of entrepreneurial orientation variables are unable to increase innovation. This is because decision makers in cooperatives still have a limited ability to act independently. Despite a proactive attitude and the courage to take risks, it has been unable to improve process innovation, market innovation, creativity, and payment administration systems. The findings of this study contradict those of Rofiaty (2019), who found that entrepreneurial orientation has a positive and significant effect on increasing innovation. Likewise, research by Prima Lita et al. (2020) which examines 183 SMEs that trade products to customers shows that entrepreneurial orientation has a significant effect on innovation.
Knowledge management has a significant and positive impact on innovation. This demonstrates that decision makers in the Cooperative on knowledge management indicators can boost innovation. It is possible to increase innovation in the Cooperative through knowledge collection, knowledge use, and knowledge sharing. The findings of this study are consistent with the findings of Afqarina dan Dihan (2019), who discovered that knowledge management has an impact on innovation.
Innovation has a positive and significant impact on organizational performance. Increasing innovation can boost organizational performance. This finding demonstrates that decision makers in cooperatives related to innovation can improve organizational performance. It is possible to speed up the transaction process and reduce the cost of product distribution through process innovation. Product layout is also good, though internet promotion is still limited. The cooperative's existing resources are also well allocated, as evidenced by the number of personnel and efficient operational time in achieving the cooperative's targets and objectives. This study supports the findings of Beltramino et al. (2020) who discovered a significant positive relationship between innovation capacity in the process and performance. The research of Alrowwad et al. (2020) discovered that innovation has an impact on organizational performance.
Entrepreneurial orientation has no positive and significant effect on organizational performance through full mediation of innovation, which means that changes in the value of innovation cannot mediate changes in the influence of entrepreneurial orientation on organizational performance. This is because the Cooperative's decision-makers' ability to act independently is still insufficient, creating an obstacle and an obstacle to innovation. Several cooperatives, particularly those under the TNI and Police, have a complex organizational structure with standard bureaucratic communication patterns that necessitate various permits and approvals from superiors. With these obstacles, Cooperative decision-makers have not innovated well. Product promotion via the internet is still in its early stages, as the country has yet to enter the e-market. Due to the cooperative's limited capital and access, updates to the payment administration system in response to customer requests are also limited.
Increasing knowledge management can improve organizational performance through innovation. This study shows that knowledge management positively and significantly affects organizational performance through innovation. It states that knowledge management has a positive and significant effect on organizational performance through partial mediation of innovation, meaning that changes in innovation value can mediate changes in the influence of knowledge management on organizational performance.

Conclusions
Based on the research findings and discussion of the impact of entrepreneurial orientation and knowledge management on organizational performance through innovation, it is possible that entrepreneurial orientation and knowledge management can improve organizational performance. This demonstrates how management can improve organizational performance with a strong entrepreneurial orientation and understanding. Entrepreneurial orientation, on the other hand, does not affect innovation. This demonstrates that a high entrepreneurial orientation is incapable of increasing innovation. Knowledge management can boost innovation, and the higher the level of knowledge management, the more it can boost innovation. High innovation can improve organizational performance. Innovation is unable to mediate between entrepreneurial orientation and organizational performance. This illustrates that the increasing innovation possessed by decision-makers in the Cooperative needs to mediate the influence of entrepreneurial orientation, which ultimately affects organizational performance. Innovation mediates the influence of knowledge management on organizational performance. This illustrates that higher innovation can mediate knowledge management, ultimately affecting organizational performance.
This study makes a theoretical contribution by bolstering theory and previous research, and it is hoped that the findings will serve as a resource for future research. This study adds value to the Cooperative by demonstrating the importance of entrepreneurship, knowledge management, and innovation in boosting business effectiveness. If entrepreneurial orientation is associated with innovation, however, performance does not improve.
The first limitation of this study is the possibility of biased respondent responses, which means that the answer results may not be objective. Second, some of the listed cooperatives have relocated or closed. And this study was only conducted at Consumer Cooperatives in Malang City using predetermined criteria. So that the results of this study cannot be generalized to other types of cooperatives. For further research, it can take a larger sample with the same institution, namely the Cooperative, and for further research, it can look for other alternative mediation variables as a paradigm update in responding to a novelty within the scope of the organization, as well as counseling to improve procedures and systems in the organization. Thus, in the future, the Cooperative can change work systems and procedures that can be updated to improve performance.