Entrepreneurial orientation strategy for sustainable SME development in developing countries: A SWOT analysis approach

Abstract

This study aims to examine how Small and Medium Enterprises (SMEs) utilize an entrepreneurial orientation (EO) to achieve sustainable development amid the complexities of the institutional environment in developing countries, with a focus on the Special Region of Yogyakarta. Using a descriptive qualitative approach supplemented by quantitative evaluation, data were collected through semi-structured, in-depth interviews with 8 key informants (SME owners, managers, and association representatives), as well as a literature review. Data were analyzed using the Internal Factor Analysis Summary (IFAS) and External Factor Analysis Summary (EFAS) matrices. The results indicate that SMEs in Yogyakarta exhibit strong internal entrepreneurial capabilities—driven by proactivity, innovation, and cultural intelligence—which are currently counterbalanced by structural resource constraints, yielding a neutral net internal score (IFAS score of 0.00). Meanwhile, significant external opportunities arising from digital adoption and sustainability integration outweigh macro-environmental threats (EFAS score of +0.30). This synthesis positions SMEs in Quadrant I (Aggressive/Growth Strategy), directly on the vertical threshold with coordinates (0.00; +0.30). Amid institutional voids and macroeconomic instability, a purely defensive stance is insufficient; a conditional growth strategy—leveraging external sustainability opportunities while systematically addressing internal management and capital bottlenecksis essential for converting systemic barriers into long-term economic, social, and environmental growth.