The Interplay of Business Strategies, Social Capital and Innovation Capability (Studies SMEs East Java, Indonesia)

1 Pages Posted: 18 May 2021

See all articles by Faisol Faisol

Faisol Faisol

Universitas Nusantara PGRI Kediri

Sri Aliami

Universitas Nusantara PGRI Kediri

Suhardi Suhardi

Universitas Nusantara PGRI Kediri

Silvi Asna Prestianawati

Brawijaya University

Date Written: March 9, 2021

Abstract

This study attempts to empirically examine the interplay between business strategies and social capital to the performance of small and medium enterprises (SMEs) operate in small industry clusters. Specifically, an attention is also paid to scrutinize the role of innovation capability in mediating this interplay. By using multi-stage sampling, the data were collected with distributing questionnaires to various clusters in East Java, Indonesia. This research then obtained 98 SMEs owners who have fulfilled the questionnaires completely. In order to test the hypotheses, Partial Least Square method then was used by employing SmartPLS 3.1.8. The results reveal that business strategies do not directly influence performance. It seems that the effects of business strategies to performance are mediated by innovation capability (β = 0.157; ρ-value = 0.026). Contrarily, social capital which is reflected by bridging and linking social capital directly contributes to firm performance (β = 0.343; ρ-value = 0.000). Therefore, this study recommends to intensify cluster social capital and augment innovation capability for enhancing the performance of SMEs.

Keywords: SME cluster, social capital, innovation capability, performance

Suggested Citation

Faisol, Faisol and Aliami, Sri and Suhardi, Suhardi and Prestianawati, Silvi Asna, The Interplay of Business Strategies, Social Capital and Innovation Capability (Studies SMEs East Java, Indonesia) (March 9, 2021). Proceedings of the 4th International Conference on Communication & Business (ICCB 2021), Available at SSRN: https://ssrn.com/abstract=3847478 or http://dx.doi.org/10.2139/ssrn.3847478

Faisol Faisol (Contact Author)

Universitas Nusantara PGRI Kediri ( email )

Sri Aliami

Universitas Nusantara PGRI Kediri ( email )

Suhardi Suhardi

Universitas Nusantara PGRI Kediri ( email )

Silvi Asna Prestianawati

Brawijaya University ( email )

Jl. Mayjend Haryono, 167
Malang, 65145
Indonesia

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