Syahnita

Small and Medium Enterprises (SMEs) in Indonesia have a strategic role in the national economy and face challenges in global competition. These challenges include limited access to capital, limitations in technology adoption, low innovation capacity, and the need for more human resource development. Many SMEs also operate informally, facing obstacles in obtaining policy support or broader market access. This study aims to analyze the effect of Customer Relationship Management (CRM) and market orientation on SMEs’ performance, with innovation capabilities as a mediating variable. The study was conducted on 348 respondents who were SMEs business actors producing packaged food in North Sumatra. The method used is quantitative through surveys and data analysis using the Structural Equation Modeling (SEM) Partial Least Squares (PLS) technique. The results of the study indicate that Customer Relationship Management (CRM) has a positive influence on SMEs performance (p=0.000) and innovation capabilities (p=0.011). Besides, market orientation also contributes significantly to SMEs’ performance (p=0.000) and innovation capabilities (p=0.000). Innovation capabilities have been proven to improve SMEs’ performance (p=0.000). In the indirect effect, innovation capabilities mediate between CRM and SMEs’ performance (p=0.013) and between market orientation and SMEs’ performance (p=0.000). These results indicate that CRM and market orientation not only have a direct effect on SMEs’ performance but also indirectly through increasing innovation capabilities.

Acknowledgment
Gratitude to the Directorate General of Higher Education, Research, and Technology of the Ministry of Education, Culture, Research, and Technology of the Republic of Indonesia (Kementerian Pendidikan, Kebudayaan, Riset, dan Teknologi Republik Indonesia, Direktorat Jenderal Pendidikan Tinggi, Riset, Dan Teknologi) for providing financial support through funding for Regular Fundamental Research in 2024 with contract number 103/E5/PG.02.00.PL/2024; 16/LL1/AL.04.03/2024; 10/II.3-AU/UMSU-LP2M/C/2024. Gratitude to the Leaders of the University and the Leaders of Universitas Muhammadiyah Sumatera Utara (UMSU) [University of Muhammadiyah Sumatera Utara] for their support and provision of facilities during the research process. Thank you to all parties who have contributed directly and indirectly to supporting and assisting this research. The assistance, time, and attention given are significant in completing this research.