Purpose: The aim of this research is to analyze empirical evidence of the effect of entrepreneurial orientations on SMEs' business performance. The previous study found that entrepreneurial orientation became an important key for an entrepreneur to enhance business performance. This study also examined the role of relational capabilities as an intervening variable to achieve business performance. Methodology: The sample in this study was the furniture SMEs in the region of central Java with a sample size of 208 SMEs. This study used purposive sampling methods. Structural Equation Modelling (SEM) was used to test results of the data analysis with the help of software AMOS/Amos Graph. Findings: The results of the study showed that entrepreneurial orientation has a significant positive effect on business performance. Entrepreneurial orientation has a significant positive effect on relational capabilities. Relational capabilities are mediated the positive relationship between entrepreneurial orientation and business performance significantly. Implications for theory and practice: The results of this study indicate the effect of entrepreneurial orientation on business performance and relational capabilities and mediating role of relational capabilities. Therefore, SMEs ought to develop relational capabilities with SMEs networks through strengthening entrepreneurial orientation to achieve SMEs' performance. Originality and value: The main contribution of the study from the combination of entrepreneurial orientation and relational capabilities of SMEs to enhance business performance.
Keywords: entrepreneurial orientation, relational capabilities, business performance.