Government Policy and SME Sustainability: Unveiling the Mediating Role of Firm Performance in Emerging Economies

Warsiyah; Juhari Aly; Tulus Suryanto; Zulkarnain Kedah

doi:10.59890/ijefbs.v4i1.367

Authors

Warsiyah Asia e University
Juhari Aly Asia e University
Tulus Suryanto UIN Raden Intan Lampung
Zulkarnain Kedah Asia e University

DOI:

https://doi.org/10.59890/ijefbs.v4i1.367

Keywords:

Government policy, firm performance, SME sustainability, mediation; Lampung

Abstract

This study examines the influence of government policy on SME sustainability in Lampung, Indonesia, with firm performance as a mediating variable. Using a quantitative cross-sectional design, data were collected from 143 SME owners and managers through structured questionnaires during a single observation period. The analysis employed Partial Least Squares–Structural Equation Modeling (PLS-SEM) to test the hypothesized relationships. The findings reveal that government policy significantly improves firm performance, which in turn strongly enhances SME sustainability, while the direct effect of policy on sustainability is relatively weaker. This study contributes by demonstrating that policy effectiveness depends on firms’ ability to internalize external support into performance. The results imply the need for integrated, capacity-driven policy interventions.

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