The Role of Strategic Leadership and Absorptive Capacity in Driving Innovation and Business Performance in MSMEs: Evidence from the Indonesian Food and Beverage Sector in West Java
DOI:
https://doi.org/10.32670/p95dtc65Keywords:
Strategic Leadership, Absorptive Capacity, Business Innovation, Business Performance, MSMEsAbstract
This study investigates the interplay between strategic leadership, absorptive capacity, business innovation, and business performance in Micro, Small, and Medium Enterprises (MSMEs) within the food and beverage (F&B) sector in West Java, Indonesia. Employing a quantitative approach, the research uses Structural Equation Modeling (SEM) to test hypotheses about the impact of strategic leadership and absorptive capacity on innovation and performance outcomes. The results indicate that strategic leadership influences business performance indirectly, primarily through its role in enhancing absorptive capacity, which, in turn, facilitates innovation. This absorptive capacity is identified as a key driver of business performance in MSMEs. The findings emphasize that effective leadership acts as a catalyst for fostering an environment conducive to learning and innovation, ultimately improving business outcomes. These insights are essential for MSME entrepreneurs and policymakers seeking strategies to enhance innovation and performance, particularly in resource-constrained environments. The study contributes to the theoretical understanding of strategic leadership and absorptive capacity in MSMEs and offers practical recommendations for strengthening business resilience and competitiveness in the rapidly evolving F&B sector.
Downloads
References
Agarwal, S. (2020). A Multidimensional Measure of Responsible Leadership: Integrating Strategy and Ethics. Group and Organization Management, 45(5), 637–673. https://doi.org/10.1177/1059601120930140
Ajgaonkar, S. (2022). Drivers of workforce agility: a dynamic capability perspective. International Journal of Organizational Analysis, 30(4), 951–982. https://doi.org/10.1108/IJOA-11-2020-2507
Al-Hawary, S. I. S. (2020). Effect of electronic customer relationship management on customers’ electronic satisfaction of communication companies in kuwait. Quality Access to Success, 21(175), 97–102.
Al-Saffar, N. A. G. (2020). The effect of total quality management practices on employee performance: The moderating role of knowledge sharing. Management Science Letters, 10(1), 77–90. https://doi.org/10.5267/j.msl.2019.8.014
Albuquerque, D. (2024). Leveraging the innovation index (IVI): A research, development, and innovation-centric measurement approach. Journal of Open Innovation Technology Market and Complexity, 10(3). https://doi.org/10.1016/j.joitmc.2024.100346
Ashok, M. (2021). How to counter organisational inertia to enable knowledge management practices adoption in public sector organisations. Journal of Knowledge Management, 25(9), 2245–2273. https://doi.org/10.1108/JKM-09-2020-0700
Asiaei, K. (2023). Green intellectual capital and ambidextrous green innovation: The impact on environmental performance. Business Strategy and the Environment, 32(1), 369–386. https://doi.org/10.1002/bse.3136
Attaran, M. (2020). Digital technology enablers and their implications for supply chain management. Supply Chain Forum, 21(3), 158–172. https://doi.org/10.1080/16258312.2020.1751568
Azzam, I. A. (2023). Impact of dynamic capabilities on competitive performance: A moderated-mediation model of entrepreneurship orientation and digital leadership. International Journal of Data and Network Science, 7(4), 1949–1962. https://doi.org/10.5267/j.ijdns.2023.6.017
Bag, S. (2023). Examining the role of virtue ethics and big data in enhancing viable, sustainable, and digital supply chain performance. Technological Forecasting and Social Change, 186. https://doi.org/10.1016/j.techfore.2022.122154
Bocken, N. M. P. (2020). Barriers and drivers to sustainable business model innovation: Organization design and dynamic capabilities. Long Range Planning, 53(4). https://doi.org/10.1016/j.lrp.2019.101950
Chatterjee, S. (2022). Big data analytics in strategic sales performance: mediating role of CRM capability and moderating role of leadership support. Euromed Journal of Business, 17(3), 295–311. https://doi.org/10.1108/EMJB-07-2021-0105
Chen, S. (2023). Environmental, social, and governance (ESG) performance and financial outcomes: Analyzing the impact of ESG on financial performance. Journal of Environmental Management, 345. https://doi.org/10.1016/j.jenvman.2023.118829
Cheng, E. C. K. (2020). Knowledge transfer strategies and practices for higher education institutions. Vine Journal of Information and Knowledge Management Systems, 51(2), 288–301. https://doi.org/10.1108/VJIKMS-11-2019-0184
Chowdhury, S. (2022). AI-employee collaboration and business performance: Integrating knowledge-based view, socio-technical systems and organisational socialisation framework. Journal of Business Research, 144, 31–49. https://doi.org/10.1016/j.jbusres.2022.01.069
Clauss, T. (2021). Strategic Agility, Business Model Innovation, and Firm Performance: An Empirical Investigation. IEEE Transactions on Engineering Management, 68(3), 767–784. https://doi.org/10.1109/TEM.2019.2910381
Cortes, A. F. (2021). Strategic Leadership of Innovation: A Framework for Future Research. International Journal of Management Reviews, 23(2), 224–243. https://doi.org/10.1111/ijmr.12246
Darwish, T. K. (2020). Organizational Learning of Absorptive Capacity and Innovation: Does Leadership Matter? European Management Review, 17(1), 83–100. https://doi.org/10.1111/emre.12320
Eicke, L. (2022). Green hydrogen value chains in the industrial sector Geopolitical and market implications. Energy Research and Social Science, 93. https://doi.org/10.1016/j.erss.2022.102847
Fachrunnisa, O. (2020). Towards SMEs’ digital transformation: The role of agile leadership and strategic flexibility. Journal of Small Business Strategy, 30(3), 65–85.
Farida, I. (2022). Business Strategies and Competitive Advantage: The Role of Performance and Innovation. Journal of Open Innovation Technology Market and Complexity, 8(3). https://doi.org/10.3390/joitmc8030163
Ferdinand, A. T. (2021). Destination authentic value advantage: An SDL perspective. Management and Marketing, 16(2), 101–117. https://doi.org/10.2478/mmcks-2021-0007
Ferdinand, A. T., & Wahyuningsih, W. (2018). Salespeople’s innovativeness: A driver of sales performance. Management and Marketing, 13(2), 966–984. https://doi.org/10.2478/mmcks-2018-0016
Gigerenzer, G. (2022). Smart Heuristics for Individuals, Teams, and Organizations. Annual Review of Organizational Psychology and Organizational Behavior, 9, 171–198. https://doi.org/10.1146/annurev-orgpsych-012420-090506
Gopal, R. (2021). Impact of online classes on the satisfaction and performance of students during the pandemic period of COVID 19. Education and Information Technologies, 26(6), 6923–6947. https://doi.org/10.1007/s10639-021-10523-1
Guillaume, R. O. (2022). Early career faculty of color and promotion and tenure: the intersection of advancement in the academy and cultural taxation. Race Ethnicity and Education, 25(4), 546–563. https://doi.org/10.1080/13613324.2020.1718084
Guzmán, V. E. (2020). Characteristics and Skills of Leadership in the Context of Industry 4.0. Procedia Manufacturing, 43, 543–550. https://doi.org/10.1016/j.promfg.2020.02.167
Hensellek, S. (2023). Entrepreneurial leadership, strategic flexibility, and venture performance: Does founders’ span of control matter? Journal of Business Research, 157. https://doi.org/10.1016/j.jbusres.2022.113544
Heubeck, T. (2023). Managerial capabilities as facilitators of digital transformation? Dynamic managerial capabilities as antecedents to digital business model transformation and firm performance. Digital Business, 3(1). https://doi.org/10.1016/j.digbus.2023.100053
Hofmeyer, A. (2021). Strategies and resources for nurse leaders to use to lead with empathy and prudence so they understand and address sources of anxiety among nurses practising in the era of COVID-19. Journal of Clinical Nursing, 30(1), 298–305. https://doi.org/10.1111/jocn.15520
Jum’a, L. (2021). A relationship between supply chain practices, environmental sustainability and financial performance: evidence from manufacturing companies in jordan. Sustainability Switzerland, 13(4), 1–22. https://doi.org/10.3390/su13042152
Kang, Y. (2022). Organizational learning in SMEs’ internationalization: A moderated mediating effect of absorptive capacity. Long Range Planning, 55(4). https://doi.org/10.1016/j.lrp.2022.102220
Kannan, K. S. P. N. (2021). Competencies of quality professionals in the era of industry 4.0: a case study of electronics manufacturer from Malaysia. International Journal of Quality and Reliability Management, 38(3), 839–871. https://doi.org/10.1108/IJQRM-04-2019-0124
Kar, S. (2021). Modeling Drivers and Barriers of Artificial Intelligence Adoption: Insights from a Strategic Management Perspective. Intelligent Systems in Accounting Finance and Management, 28(4), 217–238. https://doi.org/10.1002/isaf.1503
Keiningham, T. (2020). Customer experience driven business model innovation. Journal of Business Research, 116, 431–440. https://doi.org/10.1016/j.jbusres.2019.08.003
Khan, S. A. R. (2022). The role of block chain technology in circular economy practices to improve organisational performance. International Journal of Logistics Research and Applications, 25(4), 605–622. https://doi.org/10.1080/13675567.2021.1872512
Kim, D. K. D. (2020). An Analysis of Government Communication in the United States During the COVID-19 Pandemic: Recommendations for Effective Government Health Risk Communication. World Medical and Health Policy, 12(4), 398–412. https://doi.org/10.1002/wmh3.363
Kim, Y. (2020). Activating constructive employee behavioural responses in a crisis: Examining the effects of pre-crisis reputation and crisis communication strategies on employee voice behaviours. Journal of Contingencies and Crisis Management, 28(2), 141–157. https://doi.org/10.1111/1468-5973.12289
Kindermann, B. (2021). Digital orientation: Conceptualization and operationalization of a new strategic orientation. European Management Journal, 39(5), 645–657. https://doi.org/10.1016/j.emj.2020.10.009
Kipper, L. M. (2021). Scientific mapping to identify competencies required by industry 4.0. Technology in Society, 64. https://doi.org/10.1016/j.techsoc.2020.101454
Kurani, A. (2023). A Comprehensive Comparative Study of Artificial Neural Network (ANN) and Support Vector Machines (SVM) on Stock Forecasting. Annals of Data Science, 10(1), 183–208. https://doi.org/10.1007/s40745-021-00344-x
Lee, Y. (2021). Cultivating employee creativity through strategic internal communication: The role of leadership, symmetry, and feedback seeking behaviors. Public Relations Review, 47(1). https://doi.org/10.1016/j.pubrev.2020.101998
Luu, T. T. (2020). Integrating green strategy and green human resource practices to trigger individual and organizational green performance: the role of environmentally-specific servant leadership. Journal of Sustainable Tourism, 28(8), 1193–1222. https://doi.org/10.1080/09669582.2020.1729165
Makhloufi, L. (2024). Do knowledge sharing and big data analytics capabilities matter for green absorptive capacity and green entrepreneurship orientation? Implications for green innovation. Industrial Management and Data Systems, 124(3), 978–1004. https://doi.org/10.1108/IMDS-07-2023-0508
Miao, M. (2024). Business Continuity Innovation in Disruption Time: Sociotechnical Systems, Business Analytics, Virtual Business, and Mediating Role of Knowledge Absorptive Capacity. IEEE Transactions on Engineering Management, 71, 13201–13212. https://doi.org/10.1109/TEM.2021.3086306
Moodie, R. (2021). Ultra-Processed Profits: The Political Economy of Countering the Global Spread of Ultra-Processed Foods - A Synthesis Review on the Market and Political Practices of Transnational Food Corporations and Strategic Public Health Responses. International Journal of Health Policy and Management, 10(12), 968–982. https://doi.org/10.34172/ijhpm.2021.45
Mura, M. (2020). Circular economy in Italian SMEs: A multi-method study. Journal of Cleaner Production, 245. https://doi.org/10.1016/j.jclepro.2019.118821
Mwatondo, A. (2023). A global analysis of One Health Networks and the proliferation of One Health collaborations. Lancet, 401(10376), 605–616. https://doi.org/10.1016/S0140-6736(22)01596-3
Ngo, T. A. N. B. (2022). How Knowledge Services Clustered Firms Leverage Different Channels of Local Knowledge Spillovers for Service Innovation. Management and Organization Review, 18(6), 1116–1138. https://doi.org/10.1017/mor.2022.7
Ning, J. (2023). Relationship between enterprise digitalization and green innovation: A mediated moderation model. Journal of Innovation and Knowledge, 8(1). https://doi.org/10.1016/j.jik.2023.100326
Nyamrunda, F. C. (2021). Strategic agility, dynamic relational capability and trust among SMEs in transitional economies. Journal of World Business, 56(3). https://doi.org/10.1016/j.jwb.2020.101175
Ojha, D. (2020). Dynamic strategic planning and firm competitive performance: A conceptualization and an empirical test. International Journal of Production Economics, 222. https://doi.org/10.1016/j.ijpe.2019.09.030
Onan, A. (2021). Sentiment analysis on product reviews based on weighted word embeddings and deep neural networks. Concurrency and Computation Practice and Experience, 33(23). https://doi.org/10.1002/cpe.5909
Ouyang, X. (2020). How does environmental regulation promote technological innovations in the industrial sector? Evidence from Chinese provincial panel data. Energy Policy, 139. https://doi.org/10.1016/j.enpol.2020.111310
Öztürk, O. (2024). How to design bibliometric research: an overview and a framework proposal. Review of Managerial Science, 18(11), 3333–3361. https://doi.org/10.1007/s11846-024-00738-0
Pereira, V. (2021). Investigating Investments in agility strategies in overcoming the global financial crisis - The case of Indian IT/BPO offshoring firms. Journal of International Management, 27(1). https://doi.org/10.1016/j.intman.2020.100738
Petersson, L. (2022). Challenges to implementing artificial intelligence in healthcare: a qualitative interview study with healthcare leaders in Sweden. BMC Health Services Research, 22(1). https://doi.org/10.1186/s12913-022-08215-8
Qiao, W. (2022). Synergistic development of green building market under government guidance: A case study of Tianjin, China. Journal of Cleaner Production, 340. https://doi.org/10.1016/j.jclepro.2022.130540
Quach, S. (2022). Service integration in omnichannel retailing and its impact on customer experience. Journal of Retailing and Consumer Services, 65. https://doi.org/10.1016/j.jretconser.2020.102267
Rattis, L. (2021). Climatic limit for agriculture in Brazil. Nature Climate Change, 11(12), 1098–1104. https://doi.org/10.1038/s41558-021-01214-3
Ribeiro-Navarrete, S. (2021). The effect of digitalization on business performance: An applied study of KIBS. Journal of Business Research, 126, 319–326. https://doi.org/10.1016/j.jbusres.2020.12.065
Samimi, M. (2022). What is strategic leadership? Developing a framework for future research. Leadership Quarterly, 33(3). https://doi.org/10.1016/j.leaqua.2019.101353
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
Scarpellini, S. (2020). Dynamic capabilities and environmental accounting for the circular economy in businesses. Sustainability Accounting Management and Policy Journal, 11(7), 1129–1158. https://doi.org/10.1108/SAMPJ-04-2019-0150
Schaedler, L. (2022). Strategic leadership in organizational crises: A review and research agenda. Long Range Planning, 55(2). https://doi.org/10.1016/j.lrp.2021.102156
Setiawan, A. I., & Ferdinand, A. T. (2021). Synergized network asset: A driver for indonesia’s furniture industries to elevate marketing performance. International Journal of Business and Society, 22(2), 765–787. https://doi.org/10.33736/ijbs.3758.2021
Shin, N. (2021). Supply chain leadership driven strategic resilience capabilities management: A leader-member exchange perspective. Journal of Business Research, 122, 1–13. https://doi.org/10.1016/j.jbusres.2020.08.056
Sidhu, J. S. (2021). In the Shadow of Social Stereotypes: Gender diversity on corporate boards, board chair’s gender and strategic change. Organization Studies, 42(11), 1677–1698. https://doi.org/10.1177/0170840620944560
Singh, A. (2023). The state of the art of strategic leadership. Journal of Business Research, 158. https://doi.org/10.1016/j.jbusres.2023.113676
Skare, M. (2023). Digital transformation and European small and medium enterprises (SMEs): A comparative study using digital economy and society index data. International Journal of Information Management, 68. https://doi.org/10.1016/j.ijinfomgt.2022.102594
Srisathan, W. A. (2020). The intervention of organizational sustainability in the effect of organizational culture on open innovation performance: A case of thai and chinese SMEs. Cogent Business and Management, 7(1). https://doi.org/10.1080/23311975.2020.1717408
Suriyankietkaew, S. (2022). Sustainable Leadership Practices and Competencies of SMEs for Sustainability and Resilience: A Community-Based Social Enterprise Study. Sustainability Switzerland, 14(10). https://doi.org/10.3390/su14105762
Syahyono, S. (2018). Effect Of Portfolio Investment Optimization Risk-Based And Efficiency Investment On Investment Decision. Fair Value: Jurnal Ilmiah Akuntansi Dan Keuangan, 1(1), 124–131. https://doi.org/10.32670/fairvalue.v1i1.1193
Teklu, A. (2023). Effect of Climate Smart Agriculture Innovations on Climate Resilience among Smallholder Farmers: Empirical Evidence from the Choke Mountain Watershed of the Blue Nile Highlands of Ethiopia. Sustainability Switzerland, 15(5). https://doi.org/10.3390/su15054331
Traoré, N. (2021). Knowledge intermediation strategies: A dynamic capability perspective. Industrial and Corporate Change, 30(1), 49–74. https://doi.org/10.1093/icc/dtaa036
Vanhaverbeke, W. (2024). Overcoming organizational obstacles to open innovation success. Oxford Handbook of Open Innovation, 849–868. https://doi.org/10.1093/oxfordhb/9780192899798.013.53
Villegas, L. E. (2023). Corporate Social Responsibility and the Willingness to Eco-Innovate among Chilean Firms. Sustainability Switzerland, 15(12). https://doi.org/10.3390/su15129832
Wamba, S. F. (2024). Big data analytics-enabled sensing capability and organizational outcomes: assessing the mediating effects of business analytics culture. Annals of Operations Research, 333(2), 559–578. https://doi.org/10.1007/s10479-020-03812-4
Wang, S. (2022). Achieving green innovation and sustainable development goals through green knowledge management: Moderating role of organizational green culture. Journal of Innovation and Knowledge, 7(4). https://doi.org/10.1016/j.jik.2022.100272
Wang, T. (2022). Digital leadership and exploratory innovation: From the dual perspectives of strategic orientation and organizational culture. Frontiers in Psychology, 13. https://doi.org/10.3389/fpsyg.2022.902693
Wang, Y. (2024). Research on Mechanism and Path of Platform Economy Promoting High-Quality Development of Industrial Chain. Modern Economic Science, 46(5), 75–88. https://doi.org/10.20069/j.cnki.DJKX.202405007
Wu, H. (2021). Does internet development improve green total factor energy efficiency? Evidence from China. Energy Policy, 153. https://doi.org/10.1016/j.enpol.2021.112247
Yadav, A. (2020). Sentiment analysis using deep learning architectures: a review. Artificial Intelligence Review, 53(6), 4335–4385. https://doi.org/10.1007/s10462-019-09794-5
Yao, Q. (2024). The penetration effect of digital leadership on digital transformation: the role of digital strategy consensus and diversity types. Journal of Enterprise Information Management, 37(3), 903–927. https://doi.org/10.1108/JEIM-09-2022-0350
Zheng, G. (2023). Absorption speed, complementary assets linking capacity and key core technology breakthrough. Studies in Science of Science, 41(3), 500–510.
Zheng, J. (2022). The Adoption of Enterprise Resource Planning and Business Intelligence Systems in Small and Medium Enterprises: A Conceptual Framework. Mathematical Problems in Engineering, 2022. https://doi.org/10.1155/2022/1829347
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Coopetition : Jurnal Ilmiah Manajemen
This work is licensed under a Creative Commons Attribution 4.0 International License.
