Innovation, competitive strategy and MSME performance: a survey study on culinary SMEs in Indonesia during the COVID-19 pandemic
Abstract
The aim of this research is to examine the relationship between innovation and performance in culinary sector MSME in Indonesia. This research also examines the mediating role of competitive strategies on the correlation of innovation in SME performance. This study proceeds using a quantitative approach and Partial Least Square (PLS) through SmartPLS software. The sample of this study consisted of 201 SMEs in Indonesia (specially in Surabaya) that engage in the food and beverage (culinary) sector, and the researcher used an accidental sampling technique to collect data. The result revealed that process innovation was directly, positively, and significantly related to the performance of SMEs. Furthermore, the analysis found that competitive strategies, including cost leadership, differentiation, and focus, mediated a partial relationship between innovation and SME performance and had a full mediation of innovation in SME performance. This study shows that SMEs with process innovation can more easily achieve superior performance than SMEs which implement product-oriented innovation. This research focused on SMEs in Surabaya, so it is necessary to be careful in generalizing the results to other locations or business sectors.
Keyword : competitive strategies, innovation, SMEs, SMEs performance
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Al-Sa’di, A. F., Abdallah, A. B., & Dahiyat, S. E. (2017). The mediating role of product and process innovations on the relationship between knowledge management and operational performance in manufacturing companies in Jordan. Business Process Management Journal, 23(2), 349–376. https://doi.org/10.1108/BPMJ-03-2016-0047
Ar, I. M., & Baki, B. (2011). Antecedents and performance impacts of product versus process innovation: Empirical evidence from SMEs located in Turkish science and technology parks. European Journal of Innovation Management, 14(2), 172–206. https://doi.org/10.1108/14601061111124885
Banker, R. D., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy? Management Decision, 52(5), 872–896. https://doi.org/10.1108/MD-05-2013-0282
Bianchi, C., Cosenz, F., & Marinković, M. (2015). Designing dynamic performance management systems to foster SME competitiveness according to a sustainable development perspective: Empirical evidences from a case-study. International Journal of Business Performance Management, 16(1), 84–108. https://doi.org/10.1504/IJBPM.2015.066042
Bivona, E., & Cruz, M. (2021). Can business model innovation help SMEs in the food and beverage industry to respond to crises? Findings from a Swiss brewery during COVID-19. British Food Journal, 123(11), 3638–3660. https://doi.org/10.1108/BFJ-07-2020-0643
Chaarani, H., Vrontis, D., El Nemar, S., & El Abiad, Z. (2021). The impact of strategic competitive innovation on the financial performance of SMEs during COVID-19 pandemic period. Competitiveness Review: An International Business Journal, 32(2), 282–301. https://doi.org/10.1108/CR-02-2021-0024
Choongo, P. (2017). A longitudinal study of the impact of corporate social responsibility on firm performance in SMEs in Zambia. Sustainability, 9(8), 1300. https://doi.org/10.3390/su9081300
Eniola, A., & Ektebang, H. (2014). SME firms performance in Nigeria: Competitive advantage and its impact. International Journal of Research Studies in Management, 3(2), 75–86. https://doi.org/10.5861/ijrsm.2014.854
Ghozali, I. (2014). Structural equation modeling: Metode alternatif dengan partial least square (PLS). Badan Penerbit Universitas Diponegoro.
Ginanjar, D. (2020). Optimistis Bisnis Kuliner Bertahan saat Pandemi Covid-19. https://www.jawapos.com/surabaya/21/11/2020/optimistis-bisnis-kuliner-bertahan-saat-pandemi-covid-19/
Hafeez, M. H., Noor Mohd Shariff, M., & Lazim, H. bin M. (2013). Does innovation and relational learning influence SME performance? An empirical evidence from Pakistan. Asian Social Science, 9(15), 204–213. https://doi.org/10.5539/ass.v9n15p204
Harwiki, W., & Malet, C. (2020). Quintuple helix and innovation on performance of SMEs within ability of SMEs as a mediator variable: A comparative study of creative industry in Indonesia and Spain. Management Science Letters, 10(6), 1389–1400. https://doi.org/10.5267/j.msl.2019.11.018
Herlinawati, E., & Machmud, A. (2020). The effect of innovation on increasing business performance of SMEs in Indonesia. WSEAS Transactions on Business and Economics, 17, 51–57. https://doi.org/10.37394/23207.2020.17.7
Hilmi, M. F., Ramayah, T., Mustapha, Y., & Pawanchik, S. (2010). Product and process innovativeness: Evidence from Malaysian SMEs. European Journal of Social Sciences, 16(4), 547–555.
Ho, G. T. S., Choy, K. L., Chung, S. H., & Lam, C. H. Y. (2010). An examination of strategies under the financial tsunami. Industrial Management and Data Systems, 110(9), 1319–1336. https://doi.org/10.1108/02635571011087419
Indonesian Central Bureau of Statistics. (2020). Katalog: 3101028. BPS.
Ismail, Narsa, I. M., & Basuki. (2019). The effect of market orientation, innovation, organizational learning and entrepreneurship on firm performance. Journal of Entrepreneurship Education, 22(3), 1–19.
Istifadah, N., Wasiaturrahma, W., & Dumauli, M. T. (2018). Sektor Perdagangan Kota Surabaya Di Era Kompetisi Global. Jurnal Riset Ekonomi Dan Manajemen, 17(2), 147. https://doi.org/10.17970/jrem.17.170201.ID
Khan, I., Haleem, A., & Javaid, M. (2020). Analysing COVID-19 pandemic through cases, deaths, and recoveries. Journal of Oral Biology and Craniofacial Research, 10(4), 450–469. https://doi.org/10.1016/j.jobcr.2020.08.003
Khan, R. U., Salamzadeh, Y., Kawamorita, H., & Rethi, G. (2020). Entrepreneurial orientation and small and medium-sized enterprises’ performance; Does “Access to Finance” moderate the relation in emerging economies? Vision: The Journal of Business Perspective, 25(1). https://doi.org/10.1177/0972262920954604
Kiveu, M. N., Namusonge, M., & Muathe, S. (2019). Effect of innovation on firm competitiveness: The case of manufacturing SMEs in Nairobi County, Kenya. International Journal of Business Innovation and Research, 18(3), 307–327. https://doi.org/10.1504/IJBIR.2019.098251
Koentjoro, S., & Gunawan, S. (2020). Managing knowledge, dynamic capabilities, innovative performance, and creating sustainable competitive advantage in family companies: A case study of a family company in Indonesia. Journal of Open Innovation: Technology, Market, and Complexity, 6(3), 90. https://doi.org/10.3390/joitmc6030090
Kotane, I., & Kuzmina-Merlino, I. (2017). Analysis of small and medium sized enterprises’ business performance evaluation practice at transportation and storage services sector in Latvia. Procedia Engineering, 178, 182–191. https://doi.org/10.1016/j.proeng.2017.01.093
Kurniati, E. D., Susilowati, I., & Suharno. (2019). Sustainable competitive advantage of SMEs through resource and institutional-based management: An empirical study of batik SMEs in Central Java, Indonesia. Market-Trziste, 31(1), 61–82. https://doi.org/10.22598/mt/2019.31.1.61
Laforet, S. (2011). A framework of organisational innovation and outcomes in SMEs. International Journal of Entrepreneurial Behaviour and Research, 17(4), 380–408. https://doi.org/10.1108/13552551111139638
Lestari, S. D., Leon, F. M., Widyastuti, S., Brabo, N. A., & Putra, A. H. P. K. (2020). Antecedents and consequences of innovation and business strategy on performance and competitive advantage of SMEs. Journal of Asian Finance, Economics and Business, 7(6), 365–378. https://doi.org/10.13106/jafeb.2020.vol7.no6.365
Linton, G., & Kask, J. (2017). Configurations of entrepreneurial orientation and competitive strategy for high performance. Journal of Business Research, 70, 168–176. https://doi.org/10.1016/j.jbusres.2016.08.022
Mujanah, S., Ardiana, I. D. K. R., Nugroho, R., Candraningrat, C., Fianto, A., & Arif, D. (2022). Critical thinking and creativity of MSMEs in improving business performance during the Covid-19 pandemic. Uncertain Supply Chain Management, 10(1), 19–28. https://doi.org/10.5267/j.uscm.2021.10.014
Na, Y. K., Kang, S., & Jeong, H. Y. (2019). The effect of market orientation on performance of sharing economy business: Focusing on marketing innovation and sustainable competitive advantage. Sustainability, 11(3), 729. https://doi.org/10.3390/su11030729
Naidoo, V. (2010). Firm survival through a crisis: The influence of market orientation, marketing innovation and business strategy. Industrial Marketing Management, 39(8), 1311–1320. https://doi.org/10.1016/j.indmarman.2010.02.005
Narsa, N. P. D. R. H. (2018). Inovasi pelayanan: Telaah literatur perbandingan sektor privat dan sektor publik. Berkala Akuntansi dan Keuangan Indonesia, 3(2), 46–62. https://doi.org/10.20473/baki.v3i2.9871
Narsa, N. P. D. R. H., Prananjaya, K. P., & Narsa, I. M. (2021). Studi Deskriptif Awareness dan Persepsi pada Pelaku UMKM dan Koperasi Mengenai SAK EMKM: Sebuah Update. Wahana Riset Akuntansi, 9(2), 163–195. https://doi.org/10.24036/wra.v9i2.113537
Nasution, D. A. D., Erlina, E., & Muda, I. (2020). Dampak Pandemi COVID-19 terhadap Perekonomian Indonesia. Jurnal Benefita, 5(2), 212. https://doi.org/10.22216/jbe.v5i2.5313
Noor, L. S., Derriawan, & Soebagyo. (2019). Inovasi UMKM Boga Tradisional Dalam Mencapai Keunggulan Bersaing. JRB-Jurnal Riset Bisnis, 2(1), 70–83. https://doi.org/10.35592/jrb.v2i1.258
Novia, C., Santoso, I., Soemarno, S., & Astuti, R. (2020). Classification of product life cycle cluster to improve the performance of SMEs apple chips. Food Research, 4(6), 1859–1866. https://doi.org/10.26656/fr.2017.4(6).208
Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. Free Press. https://books.google.co.id/books?id=5xxHAAAAMAAJ
Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. Free Press “[u.a.].” https://books.google.co.id/books?id=cMytzQEACAAJ
Qosasi, A., Maulina, E., Purnomo, M., Muftiadi, A., Permana, E., & Febrian, F. (2019). The impact of information and communication technology capability on the competitive advantage of small businesses. International Journal of Technology, 10(1), 167–177. https://doi.org/10.14716/ijtech.v10i1.2332
Robb, A. M., & Watson, J. (2012). Gender differences in firm performance: Evidence from new ventures in the United States. Journal of Business Venturing, 27(5), 544–558. https://doi.org/10.1016/j.jbusvent.2011.10.002
Rosli, M. M., & Sidek, S. (2013). The impact of innovation on the performance of small and medium manufacturing enterprises: Evidence from Malaysia. Journal of Innovation Management in Small & Medium Enterprise, 2013, 885666. https://doi.org/10.5171/2013.885666
Roy, A. (2020). A comprehensive guide for design, collection, analysis and presentation of Likert and other Rating Scale Data (Analysis of Likert Scale data). Independently published.
Rua, O., França, A., & Fernández Ortiz, R. (2018). Key drivers of SMEs export performance: The mediating effect of competitive advantage. Journal of Knowledge Management, 22(2), 257–279. https://doi.org/10.1108/JKM-07-2017-0267
Sande, J. B., & Ghosh, M. (2018). Endogeneity in survey research. International Journal of Research in Marketing, 35(2), 185–204. https://doi.org/10.1016/j.ijresmar.2018.01.005
Seo, Y. W., & Chae, S. W. (2016). Market dynamics and innovation management on performance in SMEs: Multi-agent simulation approach. Procedia Computer Science, 91, 707–714. https://doi.org/10.1016/j.procs.2016.07.060
Sinurat, M., Lilinesia, L., Subhan, M., & Simanjuntak, A. (2021). The culinary sector MSME survival strategy in effort to restore populist economy based on the creative industry during the Covid-19 pandemic. Management Research and Behavior Journal, 1(1), 7–14. https://doi.org/10.29103/mrbj.v1i1.3788
Siriwan, U., Ramabut, C., Thitikalaya, N., & Pongwiritthon, R. (2013). The management of small and medium enterprises to achieve competitive advantages in Northern Thailand. International Journal of Arts & Sciences, 6(1), 147–157. https://search.proquest.com/docview/1419027272/fulltextPDF/F8197764CCFB458APQ/61?accountid=38628
Siyoto, S., & Sodik, M. A. (2015). DASAR metodologi penelitian. Literasi Media Publishing. https://books.google.co.id/books?id=QPhFDwAAQBAJ
Styaningrum, F., Soetjipto, B. E., & Wulandari, D. (2020). The determinants of SMEs’ sustainability. Humanities and Social Sciences Reviews, 8(4), 422–430. https://doi.org/10.18510/hssr.2020.8441
Sulistyo, H., & Ayuni, S. (2020). Competitive advantages of SMEs: The roles of innovation capability, entrepreneurial orientation, and social capital. Contaduria y Administracion, 65(1), 1–18. https://doi.org/10.22201/fca.24488410e.2020.1983
Susskind, D., & Vines, D. (2020). The economics of the COVID-19 pandemic: An assessment. Oxford Review of Economic Policy, 36(Suppl. 1), S1–S13. https://doi.org/10.1093/oxrep/graa036
Tjahjadi, B., Soewarno, N., & Gunawan, G. M. (2020). Effect of information capital readiness on business performance in Indonesian MSMEs: Does online market orientation matter? Journal of Asian Finance, Economics and Business, 7(12), 267–274. https://doi.org/10.13106/jafeb.2020.vol7.no12.267
Ulubeyli, S., Kazaz, A., & Sahin, S. (2018). Survival of construction SMEs in macroeconomic crises: Innovation-based competitive strategies. Journal of Engineering, Design and Technology, 16(4), 654–673. https://doi.org/10.1108/JEDT-03-2018-0057
Umar, A., Che Omar, C. M. Z., Hamzah, M. S. G., & Hashim, A. (2018). The mediating effect of innovation on entrepreneurial competencies and business success in Malaysian SMEs. International Business Research, 11(8), 142. https://doi.org/10.5539/ibr.v11n8p142
Yashavantha Rao, H. C., & Jayabaskaran, C. (2020). The emergence of a novel coronavirus (SARS-CoV-2) disease and their neuroinvasive propensity may affect in COVID-19 patients. Journal of Medical Virology, 92(7), 786–790. https://doi.org/10.1002/jmv.25918