Income, Entrepreneurial Orientation, and Financial Literacy on Investment Decisions of MSMEs

Abstract

This study aims to analyze the effect of income level and entrepreneurial orientation on investment decisions, with financial literacy as an intervening variable among Micro, Small, and Medium Enterprises (MSMEs) in Padang City. The study is motivated by the importance of financial understanding and entrepreneurial spirit in supporting rational and productive investment decisions among MSME actors.

The research method used is quantitative with a survey approach. The sample consists of 400 MSME actors selected through purposive sampling. Data were collected using a questionnaire comprising 44 items covering the variables of Income Level, Entrepreneurial Orientation, Financial Literacy, and Investment Decisions. Data analysis techniques include multiple linear regression and mediation testing using IBM SPSS Statistics 25. Validity and reliability tests were conducted using corrected item-total correlation (CITC) and Cronbach’s Alpha, along with classical assumption tests for normality, multicollinearity, and heteroscedasticity.

The results show that: (1) Income Level has a positive and significant effect on Financial Literacy and Investment Decisions; (2) Entrepreneurial Orientation has a positive and significant effect on Financial Literacy and Investment Decisions; (3) Financial Literacy significantly mediates the influence of Income Level and Entrepreneurial Orientation on Investment Decisions. These findings emphasize the importance of enhancing Financial Literacy and strengthening Entrepreneurial Orientation as strategies for sustainable MSME investment development.