Antecedents and Implications of Innovation Capability: Empirical Study of Bakpia MSMEs in Yogyakarta

Abstract

Introduction/Main Objectives: This research examines the antecedents and implications of innovation capability, empirically. The outcomes aim at contributing to the knowledge and understanding about the main driver of innovation capability. Background Problems: Yogyakarta is known for its many and varied charms, its tourist attractions, the availability of facilities and infrastructure to support tourism, such as souvenir sellers. But there is known that number of total foreign and domestic tourists has been a decrease in 2018 (Semester I by 11.51% and II by 3.33%), also in 2019 (Semester I by 11.23%). This is a challenge for MSMEs in the tourism sector and MSMEs in other sectors that support tourism, such a souvenir seller. Bakpia is one of the well-known products of the food and beverage sector in Yogyakarta often bought for souvenirs. The Bakpia MSMEs’ innovations were triggered by competition among the Bakpia producers in Yogyakarta. Therefore, every Bakpia MSME must be competitive to survive in the market. Thus, there is a need to improve their innovation capability, which will impact the innovation performance of the Bakpia MSMEs in Yogyakarta. There is a gap in the research regarding the influence of the factors that are predicted to build innovation capability. Novelty: Previous studies’ results indicate that the influence of knowledge donating and knowledge collecting about innovation performance is not yet conclusive. Therefore, this study aims to fill the gap in the previous research by examining the role of capability as a mediating between knowledge sharing process (knowledge donating and knowledge collecting) to innovation performance. Research Methods: Forty-eight items of data were obtained from Bakpia MSMEs in Yogyakarta through a survey conducted by distributing questionnaires directly to them. The data were analyzed using PLS-SEM via SmartPLS version 3.3.2. Findings/Results: This study shows that the direct and indirect effects of sharing knowledge (which includes donating and collecting knowledge) about innovation performance are found to be positive but not significant. The results also indicate that innovation capability does not significantly mediate knowledge donating and knowledge collecting about innovation performance. Meanwhile, the influence of innovation capability on innovation performance was found to be positive and significant. Conclusion: The antecedents are insignificant for innovation capability, but the antecedent’s constructs still act as a driver to build innovation capability.

MSMEs' innovation: a barrier approach

“…Majority of the MSMEs are working on B2B format so they always need to change themselves according to the requirement of the industry and their customers. It is in line with the past studies like Deng et al (2022), Qamar et al (2022), Far e (2021), Novandari (2019), Nurhayati et al (2021) and Hadjimanolis (2003).…”

“…The impact of competitive pressure on innovation adaptation in MSMEs was relatively positively limited (Deng et al ., 2022). Perceived level of competition’s pressure act as the barrier to adaption and diffusion of innovation, as competition foster innovation so when there is excessive competition innovation can be hampered (Qamar et al ., 2022; Farè, 2021; Novandari, 2019; Nurhayati et al ., 2021). Customer interaction (Krishnaswamy et al ., 2015) and collaboration with customers (Subrahmanya, 2015) are major determinants for innovation in SMEs (Krishnaswamy et al ., 2015; Subrahmanya, 2015).…”

Social Capital, Knowledge Sharing, Innovation, and Performance of Coffee Producer SMEs in Purworejo, Central Java

“…Therefore its influence on performance is not felt optimally as well as being aware of the risks that may arise from the existence of important information that should not be shared and considering others as competitors. Another study by Nurhayati et al (2021) shows that knowledge sharing has no significant effect on SMEs' innovation performance. However, greater willingness to carry out the knowledge-sharing process, which includes donating knowledge and collecting knowledge, will improve performance in SMEs (Nurhayati et al, 2021).…”

“…Another study by Nurhayati et al (2021) shows that knowledge sharing has no significant effect on SMEs' innovation performance. However, greater willingness to carry out the knowledge-sharing process, which includes donating knowledge and collecting knowledge, will improve performance in SMEs (Nurhayati et al, 2021). A person's knowledge is often associated with the level of education of its human resources.…”

“…Human resources in large companies generally can have a higher level of education than human resources in SMEs. This fact can also hinder SMEs from obtaining knowledge (Nurhayati et al, 2021). The effect of innovation on performance of SMEs.…”