Article Sidebar

Submitted
July 27, 2024
Accepted
December 27, 2024
Published
January 20, 2025
Download
Full text PDF
Statistic
Read Counter : 279 Download : 255

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose – This paper analyzes how to increase micro, small and medium-sized enterprises (MSMEs) performance through Cutting Edge Innovation Capability.
Design/methodology/approach – This study’s population consists of all 84,758 MSMEs in North Sumatera. A purposive sampling approach was used to select the respondents, with closed question for a sample of 218 leading MSME owner-managers in North Sumatera using the structural equation modelling technique (PLS-SEM). The main MSMEs in North Sumatra with the the following the categories of products: culinary, handicrafts, fashion, coffee shops, bakeries, garment, and services.
Findings – The findings of this study show that Cutting Edge Innova¬tion Capability has positive and significant effect on performance of MSMEs from data processing and hypothesis testing results. Cutting Edge Inno¬vation Capability is innovation capabilities that combine product innovation, process innovation, market innovation, and organi¬zation innovation as: Sensing Capability, Seizing Capability, Trans¬forming Capability, Break¬through Concept Capability, and Superior Marketing Capability.
Research limitations/implications – There needs to be a more balanced composition of leading MSMEs data, not too much many in food and beverage MEMEs. The research data for this category is 103 MSMEs (47%) while others MSME categories are also in need innovation capabilities such as souvenirs, agribusiness, and services.
Practical implications – Based on research results, as input for MSME manager, MSME business actors in efforts increasing the innovation capabilities of MSMEs in line with the Government’s wishes the Republic of Indonesia through the Ministry of Cooperatives and SMEs, target MSMEs can move up a class (scaling up), MEMEs can go international.
Originality/value – Cutting Edge Innovation Capability is needed to improve the MSMEs performance. In line with previous research, Market Orientation and SME Performance needed to be mediated by marketing capabilities.

Keywords

cutting edge innovation capability MSMEs performance

Article Details

License

Copyright (c) 2025 Muhammad Yamin Siregar, Warsani, Ahmad Prayudi; Alfifto

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
How to Cite
Siregar, M. Y., Warsani Purnama Sari, Ahmad Prayudi, & Alfifto. (2025). Increasing the MSMEs performance through cutting edge innovation capability. Jurnal Siasat Bisnis, 29(1), 41–57. https://doi.org/10.20885/jsb.vol29.iss1.art4
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX

References

  1. Aaker, D. (2014). Aaker on Branding. 20 Prinsip Esensial Mengelola dan Mengembangkan Brand.
  2. Abdillah & Hartono. (2015). Partial Least Square (PLS): alternatif structural equation modeling (SEM) dalam penelitian bisnis.
  3. Ali, H. & G. (2020). Effect of entrepreneurial orientation, market orientation and total quality management on performance: Evidence from Saudi SMEs. Benchmarking : An International Journal, 27(4), 1503–1531.
  4. Amin, M. et al. (2016). The effect of market orientation as a mediating variable in the relationship between entrepreneurial orientation and SMEs performance. Nankai Business Review International, 4(1), 4–8. http://dx.doi.org/10.1108/NBRI-01-2015-0001
  5. Baker, W. E., & Sinkula, J. M. (2009). Psychology and Marketing, and the Journal of Market Focused Management. Journal of the Academy of Marketing Science, the Journal of Consumer Psychology, the Journal of Advertising, 47(4), 443–464.
  6. Battor & Battor. (2010). The impact of customer relationship management capability on innovation and performance advantages: testing a mediated model. Journal of Marketing Management, 26(9–10), 842–857.
  7. Becherer, R. C., Helms, M. M., & McDonald, J. P. (2012). The effect of entrepreneurial marketing on outcome goals in SMEs. New England Journal of Entrepreneurship, 15(1), 7–18. https://doi.org/10.1108/NEJE-15-01-2012-B001
  8. Becker, D. &. (2004). R&D cooperation and innovation activities of firms—evidence for the German manufacturing industry. Research Policy, 33(2), 209–223.
  9. Bodlaj, M., Coenders, G., & Zabkar, V. (2012). Responsive and proactive market orientation and innovation success under market and technological turbulence. Journal of Business Economics and Management, 13(4), 666–687. https://doi.org/10.3846/16111699.2011.620143
  10. Boso, N., Story, V. M., & Cadogan, J. W. (2013). Entrepreneurial orientation, market orientation, network ties, and performance: Study of entrepreneurial firms in a developing economy. Journal of Business Venturing, 28(6), 708–727. https://www.sciencedirect.com/science/article/abs/pii/S0883902613000359
  11. Buli, B. M. (2017). Entrepreneurial orientation, market orientation and performance of SMEs in the manufacturing industry: Evidence from Ethiopian enterprises. Management Research Review, 40(3), 292–309. https://doi.org/10.1108/MRR-07-2016-0173
  12. Calantone, R. J., Cavusgil, S. T., & Zhao, Y. (2002). Learning orientation, firm innovation capability, and firm performance. Industrial Marketing Management. Industrial Marketing Management, 31, 515–524.
  13. Castela, B. M. S., Ferreira, F. A. F., Ferreira, J. J. M., & Marques, C. S. E. (2018). Assessing the innovation capability of small- and medium-sized enterprises using a non-parametric and integrative approach. Management Decision, 56(6), 1365–1383. https://doi.org/10.1108/MD-02-2017-0156
  14. Creswell, J. W. (2014). Penelitian Kualitatif & Desain Riset.
  15. Dadfar, Dahlgaard, Brege, & A. (2013). Linkage between organisational innovation capability, product platform development and performance. Total Quality Management & Business Excellence, 24(7–8).
  16. Day. (1994). The Capabilities of Market-Driven Organizations. American Marketing Association, 58(4).
  17. Desphande & Farley. (2004). Organizational culture, market orientation, innovativeness, and firm performance: an international research odyssey. International Journal of Research in Marketing, 21(1), 3–22.
  18. Distanont. (2020). The role of innovation in creating a competitive advantage. The Role of Innovation in Creating a Competitive Advantage, 41(1).
  19. Distanont, A., & Khongmalai, O. (2020). The role of innovation in creating a competitive advantage. Kasetsart Journal of Social Sciences, 41(1), 15–21. https://doi.org/10.1016/j.kjss.2018.07.009
  20. Dong, X. (Dani), Zhang, Z., Hinsch, C. A., & Zou, S. (2016). Reconceptualizing the elements of market orientation: A process-based view. Industrial Marketing Management, 56, 130–142. https://doi.org/10.1016/j.indmarman.2015.12.005
  21. Douglas W. Vorhies, N. A. M. (2005). Benchmarking Marketing Capabilities for Sustainable Competitive Advantage. Journal of Marketing, American Marketing Association, 69(1).
  22. Fitz-koch & Nordqvist. (2019). The Reciprocal Relationship of Innovation Capabilities and Socioemotional Wealth in a Family Firm. Journal of Small Business Management, 55(4), 547–570.
  23. Friesen, D. P. (2013). The Relationship of Market Orientation, Absorptive Capacity, Organizational Learning, and Positional Advantage to Corporate Performance in Turbulent and Non-Turbulent Environtments by Submitted to the Graduate School of Wayne State University, Detroi.
  24. Gonzales-Benito. (2009). Role of entrepreneurship and market orientation in firms’ success. European Journal of Marketing, 43(3/4), 500–522.
  25. Gruber-Mueke, T and Hofer, K. . (2015). Market orientation, entrepreneurial orientation and performance in emerging markets. International Journal of Emerging Markets, 10(3), 560–571.
  26. Hair, J. F., Sarstedt, M., Hopkins, L., & Kuppelwieser, V. G. (2014). Partial least squares structural equation modeling (PLS-SEM): An emerging tool in business research. European Business Review, 26(2), 106–121. https://doi.org/10.1108/EBR-10-2013-0128
  27. Halit Keskin. (2006). Market orientation, learning orientation, and innovation capabilities in SMEs: An extended model. European Journal of Innovation Management, 9(4), 396–417.
  28. Harahap, L. K. (2018). Analisis SEM (Structural Equation Modelling) Dengan SMARTPLS (Partial Least Square). Fakultas Sains Dan Teknologi Uin Walisongo Semarang, 1, 1.
  29. Hempenius, S. (2012). Entrepreneurial Marketing:Effects on performance of SMEs (pp. 4–28).
  30. Hendar, H., Ferdinand, A. T., & Nurhayati, T. (2017). Introducing the religio-centric positional advantage to Indonesian small businesses. Management and Marketing, 12(1), 78–102. https://doi.org/10.1515/mmcks-2017-0006
  31. Huhtala, J. P., Sihvonen, A., Frösén, J., Jaakkola, M., & Tikkanen, H. (2014). Market orientation, innovation capability and business performance: Insights from the global financial crisis. Baltic Journal of Management, 9(2), 134–152. https://doi.org/10.1108/BJM-03-2013-0044
  32. Hult and Ketchen. (2001). Does market orientation matter?: A test of the relationship between positional advantage and performance. Strategic Management Journal, 22(9), 899–906. https://doi.org/10.1002/smj.197
  33. Hult, H. & K. (2004). Innovativeness: Its antecedents and impact on business performance. Industrial Marketing Management, 33(5), 429–438.
  34. Hunt, S. & Morgan, R. (1996). The Resource-Advantage Theory of Competition: Dynamics, Path Dependencies, and Evolutionary Dimensions. Journal of Marketing, American Marketing Association, 60(4).
  35. Hunt. (2013). A general theory of business marketing: R-A theory, Alderson, the ISBM framework, and the IMP theoretical structure. Industrial Marketing Management, 42(3), 283–293.
  36. Hunt & Madhavaram. (2012). Managerial action and resource‐advantage theory: conceptual frameworks emanating from a positive theory of competition. Journal of Business and Industrial Marketing, 27(7), 582–591.
  37. Jiménez-Zarco, A. I., Martínez-Ruiz, M. P., & Izquirdo-Yusta, A. (2011). The impact of market orientation dimensions on client cooperation in the development of new service innovations. European Journal of Marketing, 45(1), 43–67. https://doi.org/10.1108/03090561111095595
  38. Jogaratnam, G. (2017). The effect of market orientation, entrepreneurial orientation and human capital on positional advantage: Evidence from the restaurant industry. International Journal of Hospitality Management, 60, 104–113. https://doi.org/10.1016/j.ijhm.2016.10.002
  39. Kajalo, S. A. L. (2015). Market orientation, entrepreneurial orientation and business performance among small retailers. International Journal of Retail & Distribution Management, 43(7), 580–596.
  40. Kamboj, S., Goyal, P., & Rahman, Z. (2015). A Resource-Based View on Marketing Capability, Operations Capability and Financial Performance: An Empirical Examination of Mediating Role. Procedia - Social and Behavioral Sciences, 189, 406–415. https://doi.org/10.1016/j.sbspro.2015.03.201
  41. Kohli, A. K., & Jaworski, B. J. (1990). Market Orientation : The Construct, Research Propositions, and Managerial Implications. 54(April), 1–18.
  42. Kotler, Philip, et al. (1994). “Principles of marketing practice.”
  43. Kotler, P. (2015). Marketing management an Asian perspective. In Pearson one.
  44. Kumar, V., Jones, E., Venkatesan, R., & Leone, R. P. (2011). Is market orientation a source of sustainable competitive advantage or simply the cost of competing? Journal of Marketing, 75(1), 16–30. https://doi.org/10.1509/jmkg.75.1.16
  45. Langerak, H. & R. (2004). The Impact of Market Orientation, Product Advantage, and Launch Proficiency on New Product Performance and Organizational Performance. Journal of Product Innovation Management, 21(2), 79–94.
  46. Lee, K., & Yoo, J. (2019). How does open innovation lead competitive advantage? A dynamic capability view perspective. PLoS ONE, 14(11), 1–18. https://doi.org/10.1371/journal.pone.0223405
  47. Lekmat, L., Selvarajah, C., & Hewege, C. (2018). Relationship between Market Orientation, Entrepreneurial Orientation, and Firm Performance in Thai SMEs: The Mediating Role of Marketing Capabilities. International Journal of Business and Economics, 17(3), 213–237. http://www.ijbe.org/table of content/pdf/vol17-3/02.pdf
  48. Lonial and Carter. (2015). The impact of organizational orientations on medium and small firm performance A resource‐based perspective.pdf. Journal of Small Business Management, 53(1), 94–113.
  49. Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135–172. https://doi.org/10.5465/AMR.1996.9602161568
  50. Mahmoud, M. A., Blankson, C., Owusu-Frimpong, N., Nwankwo, S., & Trang, T. P. (2016). Market orientation, learning orientation and business performance: The mediating role of innovation. International Journal of Bank Marketing, 34(5), 623–648. https://doi.org/10.1108/IJBM-04-2015-0057
  51. Masduki, T & Rully, I. (2020). Rencana Strategis Kementerian Koperasi dan Usaha Kecil dan Menengah Tahun 2020-2024. In Kementerian Koperasi dan Usaha Kecil dan Menengah.
  52. Milfelner, B., Dlačić, J., Snoj, B., & Selinšek, A. (2019). Importance of Innovation Resources for Market Orientation – Financial Performance Link: Mediating Role of Proactive Market Orientation. Naše Gospodarstvo/Our Economy, 65(4), 1–13. https://doi.org/10.2478/ngoe-2019-0015
  53. Morgan, N., Slotegraaf, R., Vorhies, D. (2009). Linking marketing capabilities with profit growth. International Journal of Research in Marketing, 26(4), 284–293.
  54. Morgan, N. A. (2012). Marketing and business performance. Journal of the Academy of Marketing Science, 40(1), 102–119. https://doi.org/10.1007/s11747-011-0279-9
  55. Murray-Gao-Kotabe. (2011). Market orientation and performance of export ventures: the process through marketing capabilities and competitive advantages. Journal of the Academy of Marketing Science, 39, 252–269.
  56. Murwatiningsih, & Oktarina, N. (2020). Creating Innovation Based on Superior Business Capabilities and Entrepreneurial Networks to Enhance Marketing Performance. KnE Social Sciences, 2020(2009), 613–626. https://doi.org/10.18502/kss.v4i6.6631
  57. Naidoo. (2010). Firm survival through a crisis: The influence of market orientation, marketing innovation and business strategy. Industrial Marketing Management, 39(8), 1311–1320.
  58. Nakata & Zhu. (2006). Information Technology and Customer Orientation: A Study of Direct, Mediated, and Interactive Linkages. Journal of Marketing Management, 22(3–4), 319–354.
  59. Narver and Slater. (1990). The Effect of a Market Orientation on Business Profitability. Journal of Marketing, American Marketing Association, 54(4).
  60. Narver, J. C., Slater, S. F., & MacLachlan, D. L. (2004). Responsive and proactive market orientation and new-product success. Journal of Product Innovation Management, 21(5), 334–347. https://doi.org/10.1111/j.0737-6782.2004.00086.x
  61. O’Cass, A., & Sok, P. (2014). The role of intellectual resources, product innovation capability, reputational resources and marketing capability combinations in firm growth. International Small Business Journal: Researching Entrepreneurship, 32(8), 996–1018. https://doi.org/10.1177/0266242613480225
  62. Odoom, R., & Mensah, P. (2019). Brand orientation and brand performance in SMEs: The moderating effects of social media and innovation capabilities. Management Research Review, 42(1), 155–171. https://doi.org/10.1108/MRR-12-2017-0441
  63. Oura, M. M., Zilber, S. N., & Lopes, E. L. (2016). Innovation capacity, international experience and export performance of SMEs in Brazil. International Business Review, 25(4), 921–932. https://doi.org/10.1016/j.ibusrev.2015.12.002
  64. Panayides. (2006). Enhancing innovation capability through relationship management and implications for performance. European Journal of Innovation Management, 9(4), 466–483.
  65. Pandiangan, K., Masiyono, M., & Dwi Atmogo, Y. (2021). Faktor-Faktor Yang Mempengaruhi Brand Equity: Brand Trust, Brand Image, Perceived Quality, & Brand Loyalty. Jurnal Ilmu Manajemen Terapan, 2(4), 471–484. https://doi.org/10.31933/jimt.v2i4.459
  66. Pratono, A. H., Darmasetiawan, N. K., Yudiarso, A., & Jeong, B. G. (2019). Achieving sustainable competitive advantage through green entrepreneurial orientation and market orientation: The role of inter-organizational learning. Bottom Line, 32(1), 2–15. https://doi.org/10.1108/BL-10-2018-0045
  67. Rapih. (2015). Analisis Pengaruh Kompetensi SDM, Modal Sosial, dan Modal Finansial Terhadap KInerja UMKM.
  68. Rohimah, N. N. (2019). Efektifitas_Digititalisasi_Marketing_Para_Pelaku_U. Al-I’lam; Jurnal Komunikasi Dan Penyiaran Islam, 3(1), 1–14.
  69. Saunila, M. (2020). Innovation capability in SMEs: A systematic review of the literature. Journal of Innovation and Knowledge, 5(4), 260–265. https://doi.org/10.1016/j.jik.2019.11.002
  70. Shaher, A. T. H. Q., & Ali, K. A. M. (2020). The effect of entrepreneurial orientation and knowledge management on innovation performance: The mediation role of market orientation. Management Science Letters, 10(15), 3723–3734. https://doi.org/10.5267/j.msl.2020.6.020
  71. Siahaan, D. T., & Tan, C. S. L. (2020). Antecedents of innovation capability and firm performance of indonesian ict smes. Asian Journal of Business Research, 10(2), 45–71. https://doi.org/10.14707/ajbr.200083
  72. Sok, P., O’Cass, A., & Sok, K. M. (2013). Achieving superior SME performance: Overarching role of marketing, innovation, and learning capabilities. Australasian Marketing Journal, 21(3), 161–167. https://doi.org/10.1016/j.ausmj.2013.04.001
  73. Sugiyono. (2010). Statistik untuk Penelitian.
  74. Sulistyo, H., & Siyamtinah. (2016). Innovation capability of SMEs through entrepreneurship, marketing capability, relational capital and empowerment. Asia Pacific Management Review, 21(4), 196–203. https://doi.org/10.1016/j.apmrv.2016.02.002
  75. Thornhill. (2006). Knowledge, innovation and firm performance in high- and low-technology regimes. Journal of Business Venturing, 21(5).
  76. Wang & Ahmed. (2007). Dynamic capabilities: A review and research agenda. International Journal of Management Reviews.
  77. Wang, Z., Wang, N., & Liang, H. (2014). Knowledge sharing, intellectual capital and firm performance. Management Decision, 52(2), 230–258. https://doi.org/10.1108/MD-02-2013-0064
  78. Wong & Tong. (2012). The influence of market orientation on new product success. European Journal of Innovation Management, 15(1), 99–121.
  79. Yoganathan et al. (2015). The influence of relationship marketing orientation on brand equity in banks. Journal of Retailing and Consumer Services, 26, 14–22.
  80. Zhang, M., & Hartley, J. L. (2018). Guanxi, IT systems, and innovation capability: The moderating role of proactiveness. Journal of Business Research, 90, 75–86. https://doi.org/10.1016/j.jbusres.2018.04.036