THE ROLE OF KNOWLEDGE CREATION IN MEDIATING THE EFFECT OF NETWORK CAPABILITY ON PERFORMANCE OF MICRO, SMALL, AND MEDIUM ENTERPRISES
DOI:
https://doi.org/10.33736/ijbs.6417.2023Keywords:
Network capability, knowledge creation, MSMEs performanceAbstract
Performance has received special attention in the context of Micro, Small, and Medium Enterprises (MSMEs) due to its important role in enhancing an organization's competitive advantage. This study aims to identify predictors of MSME performance. This study used a survey method with 240 respondents. We analyzed the data using Smart-PLS (Partial Least Square) for Structural Equation Modelling (SEM). The results show that Network Capability and Knowledge Creation positively affect MSME performance. Furthermore, Knowledge Creation acts as a mediator between them. This research provides further suggestions on how MSME owners can improve performance in their MSMEs.
References
Acosta, A. S., Crespo, Á. H., & Agudo., J. C. (2018). Effect of market orientation, network capability and entrepreneurial orientation on international performance of small and medium enterprises (SMEs). International Business Review, 27(6), 1128-1140.
https://doi.org/10.1016/j.ibusrev.2018.04.004
Acquaah, M. (2007). Managerial social capital, strategic orientation, and organizational performance in an emerging economy. Strategic Management Journal, 28(12), 1235-1255. https://doi.org/10.1002/smj.632
https://doi.org/10.1002/smj.632
Alhusen, H., & Bennat, T. (2020). Combinatorial innovation modes in SMEs: mechanisms integrating STI processes into DUI mode learning and the role of regional innovation policy. European Planning Studies, 29(4), 1-27. https://doi.org/10.1080/09654313.2020.1786009
https://doi.org/10.1080/09654313.2020.1786009
Ali, I., Akhter, W., & Afzal, H. (2010). Effects of Knowledge Management Practices on Organizational Innovativeness and Performance: evidence from SME Sector of Pakistan. Actual Problems of Economics, 3(7), 1-12.
Asian Development Bank. (2020). Outlook 2020. Retrieved from https://globalfert.com.br/pdf/outlook_globalfert2020.pdf
Brockman, B. K., & Morgan, R. M. (2003). The Role of Existing Knowledge in New Product Innovativeness and Performance. Decision Sciences, 34(2), 385-419. https://doi.org/10.1111/1540-5915.02326
https://doi.org/10.1111/1540-5915.02326
Chatterjee, S., Chaudhuri, R., González, V. I., Kumar, A., & Singh, S. K. (2022). Resource integration and dynamic capability of frontline employee during COVID-19 pandemic: From value creation and engineering management perspectives. Technological Forecasting & Social Change, 176, 1-13.
https://doi.org/10.1016/j.techfore.2021.121446
Coviello, N. E., & Joseph, R. M. (2012). Creating major innovations with customers: Insights from small and young technology firms. Journal of Marketing, 76(6), 87-104. https://doi.org/10.1509/jm.10.0418
https://doi.org/10.1509/jm.10.0418
Dash, A. (2018). Micro and small medium enterprises in India: An analytical and policy perspective. International Journal of Scientific & Engineering Research, 9(7), 1121-1149.
Dayan, M., Zacca, R., & Di Benedetto, A. (2013). An exploratory study of entrepreneurial creativity: Its antecedents and mediators in the context of UAE firms. Creativity and Innovation Management, 22(3), 223-240. https://doi.org/10.1111/caim.12036
https://doi.org/10.1111/caim.12036
Demirkan, I., Srinivasan, R., & Nand, A. (2022). Innovation in SMEs: the role of employee training in German SMEs. Journal of Small Business and Enterprise Development, 29(3), 421-440. https://doi.org/10.1108/JSBED-07-2020-0246
https://doi.org/10.1108/JSBED-07-2020-0246
Dinas Koperasi Usaha Kecil & Menengah Kota Semarang. (2022). Data UMKM di Kota Semarang. Retrieved June 12, 1988, from https://data.semarangkota.go.id
Dinas Koperasi Usaha Kecil & Menengah Provinsi Jawa Tengah. (2022). Data UMKM Per Kab/Kota. Retrieved June 12, 1988, from www.op-umkm.jatengprov.go.id
Dubey, R., Gunasekaran, A., Childe, S. J., Roubaud, D., Fosso Wamba, S., Giannakis, M., & Foropon, C. (2019). Big data analytics and organizational culture as complements to swift trust and collaborative performance in the humanitarian supply chain. International Journal of Production Economics, 210, 120-136. https://doi.org/10.1016/j.ijpe.2019.01.023
https://doi.org/10.1016/j.ijpe.2019.01.023
Dutta, S., & Kumar, J. A. (2022). Knowledge creation and external consultants during ERP implementation: an interpretive study. Business Process Management Journal, 28(1), 113-130. https://doi.org/10.1108/BPMJ-01-2021-0055
https://doi.org/10.1108/BPMJ-01-2021-0055
Eşitti, B., & Kasap, M. (2019). The impact of leader-member exchange on lodging employees' dynamic capacities: The mediating role of job satisfaction. Tourism and Hospitality Research, 20(2), 1-8. https://doi.org/10.1177/1467358419826397
https://doi.org/10.1177/1467358419826397
Farida, N., & Nuryakin. (2021). Network capability, relational capability and Indonesian manufacturing SME performance: An empirical analysis of the mediating role of product innovation. Engineering Management in Production and Services, 13(1), 41-52. https://doi.org/10.2478/emj-2021-0003
https://doi.org/10.2478/emj-2021-0003
Freel, M. (1999). Where are the skills gaps in innovative small firms? International Journal of Entrepreneurial Behaviour & Research, 5(3), 144-154.
https://doi.org/10.1108/13552559910371095
Gassmann, O., & Keupp, M. (2007). The competitive advantage of early and rapidly international SMEs in the biotechnology industry: a knowledge-based view. Journal of World Business, 42(3), 350-366.
https://doi.org/10.1016/j.jwb.2007.04.006
Gronum, S., Verreynne, M. L., & Kastelle, T. (2012). The Role of Networks in Small and Medium-Sized Enterprise Innovation and Firm Performance. Journal of Small Business Management, 50(2), 257-282. https://doi.org/10.1111/j.1540-627X.2012.00353.x
https://doi.org/10.1111/j.1540-627X.2012.00353.x
Gulati, R. (1999). Network location and learning: The influence of network resources and firm capabilities on alliance formation. Strategic Management Journal, 20(5), 397-420. https://doi.org/10.1002/(SICI)1097-0266(199905)20:5<397::AID-SMJ35>3.0.CO;2-K
https://doi.org/10.1002/(SICI)1097-0266(199905)20:5<397::AID-SMJ35>3.0.CO;2-K
Gulati, R., Nohria, N., & Zaheer, A. (2000). Strategic networks. Strategic Management Journal, 21(3), 203-215. https://doi.org/10.1002/(SICI)1097-0266(200003)21:3<203::AID-SMJ102>3.0.CO;2-K
https://doi.org/10.1002/(SICI)1097-0266(200003)21:3<203::AID-SMJ102>3.0.CO;2-K
Gupta, S., Justy, T., Kamboj, S., Kumar, A., & Kristoffersen, E. (2021). Big data and firm marketing performance: Findings from knowledge-based view. Technological Forecasting and Social Change, 171(1), 1-36. https://doi.org/10.1016/j.techfore.2021.120986
https://doi.org/10.1016/j.techfore.2021.120986
Hair, J., Risher, J., Sarstedt, M., & Ringle, C. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31, 2-24.
https://doi.org/10.1108/EBR-11-2018-0203
Heenkenda, H., Xu, F., Kulathunga, K., & Senevirathne, W. (2022). The Role of Innovation Capability in Enhancing Sustainability in SMEs: An Emerging Economy Perspective. Sustainability (Switzerland), 14(17), 10832. https://doi.org/10.3390/su141710832
https://doi.org/10.3390/su141710832
Hernita, Surya, B., Perwira, I., Abubakar, H., & Idris, M. (2021). Economic business sustainability and strengthening human resource capacity based on increasing the productivity of small and medium enterprises (SMES) in Makassar city, Indonesia. Sustainability (Switzerland), 13(6), 1-37. https://doi.org/10.3390/su13063177
https://doi.org/10.3390/su13063177
Hoffmann, W. H. (2007). Strategies for managing a portfolio of alliances. Strategic Management Journal, 28(8), 827-856. https://doi.org/10.1002/smj.607
https://doi.org/10.1002/smj.607
International Labour Organization (ILO). (2019). Financing Small Businesses in Indonesia: Challenges and Opportunities. In Innovation Strategies in the Food Industry: Tools for Implementation. Retrieved from www.ilo.org/publns
Iqbal, S., Martins, J. M., Mata, M. N., Naz, S., Akhtar, S., & Abreu, A. (2021). Linking entrepreneurial orientation with innovation performance in smes; the role of organizational commitment and transformational leadership using smart pls-sem. Sustainability (Switzerland), 13(8), 4361. https://doi.org/10.3390/su13084361
https://doi.org/10.3390/su13084361
Jayasingam, S., Ramayah, T., Jantan, M., & Ansari, M. A. (2013). Knowledge management practices and performance: Are they truly linked? Knowledge Management Research & Practice, 1-3(3), 661-667.
https://doi.org/10.1057/kmrp.2012.5
Jha, P. P., & Cottam, E. (2021). Embeddedness of Inter-firm Ties and Knowledge Creation. European Management Review, 18(3), 215-227. https://doi.org/10.1111/emre.12455
https://doi.org/10.1111/emre.12455
Kale, P., Singh, H., & Perlmutter, H. (2000). Learning and protection of proprietary assets in strategic alliances: Building relational capital. Strategic Management Journal, 21(3), 217-237. https://doi.org/10.1002/(SICI)1097-0266(200003)21:3<217::AID-SMJ95>3.0.CO;2-Y
https://doi.org/10.1002/(SICI)1097-0266(200003)21:3<217::AID-SMJ95>3.0.CO;2-Y
Kock, N. (2015). Common Method Bias in PLS-SEM. International Journal of E-Collaboration, 11(4), 1-10. https://doi.org/10.4018/ijec.2015100101
https://doi.org/10.4018/ijec.2015100101
Kotane, I., & Kuzmina-Merlino, I. (2012). Assessment of Financial Indicators for Evaluation of Business Performance. European Integration Studies, 6(2012), 216-225. https://doi.org/10.5755/j01.eis.0.6.1554
https://doi.org/10.5755/j01.eis.0.6.1554
Kumar, B., & Gajakosh, A. R. (2021). MSMEs Issues and Prospectus of Uttarakhand: A Conceptual Investigation with Special Reference to COVID-19. SEDME (Small Enterprises Development, Management & Extension Journal): A Worldwide Window on MSME Studies, 48(3), 299-310. https://doi.org/10.1177/09708464211073536
https://doi.org/10.1177/09708464211073536
Lu, J. W., & Beamish, P. W. (2006). Partnering strategies and performance of SMEs' international joint ventures. Journal of Business Venturing, 21(4), 461-486. https://doi.org/10.1016/j.jbusvent.2005.02.002
https://doi.org/10.1016/j.jbusvent.2005.02.002
Madrid-Guijarro, A., Martin, D. P., & García-Pérez-de-Lema, D. (2021). Capacity of open innovation activities in fostering product and process innovation in manufacturing SMEs. Review of Managerial Science, 15(7), 2137-2164. https://doi.org/10.1007/s11846-020-00419-8
https://doi.org/10.1007/s11846-020-00419-8
Mayr, S., Mitter, C., Kücher, A., & Duller, C. (2021). Entrepreneur characteristics and differences in reasons for business failure: evidence from bankrupt Austrian SMEs. Journal of Small Business & Entrepreneurship, 33(5), 539-558.
https://doi.org/10.1080/08276331.2020.1786647
Menne, F., Surya, B., Yusuf, M., Suriani, S., Ruslan, M., & Iskandar, I. (2022). Optimizing the Financial Performance of SMEs Based on Sharia Economy: Perspective of Economic Business Sustainability and Open Innovation. Journal of Open Innovation: Technology, Market, and Complexity, 8(18), 1-24. https://doi.org/10.3390/joitmc8010018
https://doi.org/10.3390/joitmc8010018
Messersmith, J. G., & Wales, W. J. (2013). Entrepreneurial orientation and performance in young firms: The role of human resource management. International Small Business Journal, 31(2), 115-136. https://doi.org/10.1177/0266242611416141
https://doi.org/10.1177/0266242611416141
Migdadi, M. M., Zaid, M. K. A., Yousif, M., Almestarihi, R., & Al-Hyari, K. (2017). An Empirical Examination of Knowledge Management Processes and Market Orientation, Innovation Capability, and Organisational Performance: Insights from Jordan. Journal of Information & Knowledge Management, 16(1), 1750002. https://doi.org/https://doi.org/10.1142/S0219649217500022
https://doi.org/10.1142/S0219649217500022
Muliadi, Darma, D. C., & Kasuma, J. (2020). MSMEs as mediation in the effects of investment credit , interest rates , and labor on economic growth : Evidence from Indonesia. IJFBS: International Journal of Finance & Banking Studies, 9(2), 1-12.
https://doi.org/10.20525/ijfbs.v9i2.702
Nadaf, R., & Kadakol, A. (2017). A study of major problem, prospects and performance aspects of MSME's in India. International Journal of Business, Management and Allied Sciences, 4(4), 177-184.
Nonaka, I., Von Krogh, G., & Voelpel, S. (2006). Organizational knowledge creation theory: Evolutionary paths and future advances. Organization Studies, 27(8), 1179-1208. https://doi.org/10.1177/0170840606066312
https://doi.org/10.1177/0170840606066312
Oktari, R. S., Latuamury, B., Idroes, R., Sofyan, H., & Munadi, K. (2022). Validating knowledge creation factors for community resilience to disaster using structural equation modelling. International Journal of Disaster Risk Reduction, 81, 103290. https://doi.org/10.1016/j.ijdrr.2022.103290
https://doi.org/10.1016/j.ijdrr.2022.103290
Patalas-Maliszewska, J., & Kłos, S. (2017). A Study on Improving the Effectiveness of a Manufacturing Company in the Context of Knowledge Management-Research Results. Foundations of Management, 9(1), 149-160. https://doi.org/10.1515/fman-2017-0012
https://doi.org/10.1515/fman-2017-0012
Prasetyo, P. E. (2020). The Role of Government Expenditure and Investment for MSME Growth : Empirical Study in Indonesia. Journal of Asian Finance, Economics and Business, 7(10), 471-480. https://doi.org/10.13106/jafeb.2020.vol7.no10.471
https://doi.org/10.13106/jafeb.2020.vol7.no10.471
Prasetyo, P., & Kistanti, N. (2020). Human capital, institutional economics and entrepreneurship as a driver for quality & sustainable economic growth. Entrepreneurship and Sustainability Issues, 7(4), 2575-2589.
https://doi.org/10.9770/jesi.2020.7.4(1)
Purnamawati, I. G. A., Jie, F., Hong, P. C., & Yuniarta, G. A. (2022). Analysis of Maximization Strategy Intangible Assets through the Speed of Innovation on Knowledge-Driven Business Performance Improvement. Economies, 10(6), 149. https://doi.org/10.3390/economies10060149
https://doi.org/10.3390/economies10060149
Quaye, D., & Mensah, I. (2018). Marketing innovation and sustainable competitive advantage of manufacturing SMEs in Ghana. Management Decision, 57(7), 1535-1553. https://doi.org/https://doi.org/10.1108/MD-08-2017-0784
https://doi.org/10.1108/MD-08-2017-0784
Rank, C., Rank, O., & Wald, A. (2006). Integrated versus core-periphery structures in regional biotechnology networks. European Management Journal, 24(1), 73-85. https://doi.org/10.1016/j.emj.2005.12.009
https://doi.org/10.1016/j.emj.2005.12.009
Rita, M., Kristanto, A., Nugrahanti, Y., & Usmanij, P. (2022). Funding and Performance Pattern Matrix in the Startup Phase: A Study of Startup MSMEs in Indonesia. In V. Ratten, P. Jones, V. Braga, & E. Parra-López (Eds.), Artisan Entrepreneurship (pp. 127-160). Bingley: Emerald Publishing Limited. https://doi.org/https://doi.org/10.1108/978-1-80262-077-120221012
https://doi.org/10.1108/978-1-80262-077-120221012
Robert, M., Giuliani, P., & Gurau, C. (2022). Implementing industry 4.0 real-time performance management systems: the case of Schneider Electric. Production Planning and Control, 33(2-3), 244-260. https://doi.org/10.1080/09537287.2020.1810761
https://doi.org/10.1080/09537287.2020.1810761
Sa, M. L. L., & Chai, Y. K. (2020). Managerial orientations and business performance in small and medium tourism accommodation businesses (SMTABs): A resource advantage- knowledge creation approach. The International Journal of Entrepreneurship and Innovation, 21(1), 17-37. https://doi.org/10.1177/1465750318809517
https://doi.org/10.1177/1465750318809517
Salamzadeh, A., & Dana, L. (2021). The coronavirus (COVID-19) pandemic: challenges among Iranian startups. Journal of Small Business & Entrepreneurship, 33(5), 489-512.
https://doi.org/10.1080/08276331.2020.1821158
Sarvari, H., Chan, D. W., Alaeos, A. K. F., Olawumi, T. O., & Abdalridah Aldaud, A. A. (2021). Critical success factors for managing construction small and medium-sized enterprises in developing countries of Middle East: Evidence from Iranian construction enterprises. Journal of Building Engineering, 43, 103152. https://doi.org/10.1016/j.jobe.2021.103152
https://doi.org/10.1016/j.jobe.2021.103152
Satiman, L., Abu Mansor, N., & Zulkifli, N. (2015). Return on Investment (ROI) training evaluation in Malaysian SMEs: factors influencing the adoption process. Development and Learning in Organizations, 29(2), 18-21. https://doi.org/https://doi.org/10.1108/DLO-05-2014-0035
https://doi.org/10.1108/DLO-05-2014-0035
Singh, S. K., Gupta, S., Busso, D., & Kamboj, S. (2021). Top management knowledge value, knowledge sharing practices, open innovation and organizational performance. Journal of Business Research, 128, 788-798. https://doi.org/10.1016/j.jbusres.2019.04.040
https://doi.org/10.1016/j.jbusres.2019.04.040
Spender, J. (1996). Making knowledge the basis of a dynamic theory of the firm. Strategic Management Journal, 17(SUPPL. WINTER), 45-62. https://doi.org/10.1002/smj.4250171106
https://doi.org/10.1002/smj.4250171106
Surya, B., Menne, F., Sabhan, H., Suriani, S., Abubakar, H., & Idris, M. (2021). Economic growth, increasing productivity of smes, and open innovation. Journal of Open Innovation: Technology, Market, and Complexity, 7(1), 1-37. https://doi.org/10.3390/joitmc7010020
https://doi.org/10.3390/joitmc7010020
Tolstoy, D. (2009). Knowledge combination and knowledge creation in a foreign-market network. Journal of Small Business Management, 47(2), 202-220. https://doi.org/10.1111/j.1540-627X.2009.00268.x
https://doi.org/10.1111/j.1540-627X.2009.00268.x
Tubigi, M., & Alshawi, S. (2015). The impact of knowledge management processes on organisational performance: The case of the airline industry. Journal of Enterprise Information Management, 28(2), 267-285. https://doi.org/10.1108/JEIM-01-2014-0003
https://doi.org/10.1108/JEIM-01-2014-0003
Viet, N. T., & Kravets, A. G. (2022). The New Method for Analyzing Technology Trends of Smart Energy Asset Performance Management. Energies, 15(18), 6613. https://doi.org/10.3390/en15186613
https://doi.org/10.3390/en15186613
Walter, A., Auer, M., & Ritter, T. (2006). The impact of network capabilities and entrepreneurial orientation on university spin-off performance. Journal of Business Venturing, 21(4), 541-567. https://doi.org/10.1016/j.jbusvent.2005.02.005
https://doi.org/10.1016/j.jbusvent.2005.02.005
Wong, K. K.-K. (2013). Partial Least Squares Structural Equation Modeling (PLS-SEM) Techniques Using SmartPLS. Marketing Bulletin, 24(1), 1-32.
Zacca, R., Dayan, M., & Ahrens, T. (2015). Impact of network capability on small business performance. Management Decision, 53(1), 2-23. https://doi.org/10.1108/MD-11-2013-0587
https://doi.org/10.1108/MD-11-2013-0587
Zacca, R., & Selen, W. (2011). Unravelling a Manager's Proclivity to Innovate: An Exploratory Study. The International Journal of Entrepreneurship and Innovation, 12(3), 157-168. Retrieved from https://doi.org/10.5367/ijei.2011.0041
https://doi.org/10.5367/ijei.2011.0041
Zhou, L. (2007). The effects of entrepreneurial proclivity and foreign market knowledge on early internationalization. Journal of World Business, 42(3), 281-293. https://doi.org/10.1016/j.jwb.2007.04.009
https://doi.org/10.1016/j.jwb.2007.04.009
Zutshi, A., Mendy, J., Sharma, G. D., Thomas, A., & Sarker, T. (2021). From challenges to creativity: Enhancing smes' resilience in the context of covid-19. Sustainability (Switzerland), 13(12), 1-16. https://doi.org/10.3390/su13126542
Downloads
Published
How to Cite
Issue
Section
License
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.
