THE DEVELOPMENT OF AN ORGANIZATIONAL PERFORMANCE MODEL FOR INDONESIAN ISLAMIC BANKING

• Main Author: Rani Pertiwi, Ruspita
• Format: Dissertations
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/67871
• Institution: Institut Teknologi Bandung

This study aims to produce a framework in the form of a model that can be used as a reference to improve organizational performance from the management side. Organizational performance reflects whether an organization performs well in achieving its goals due to the management of four systems (input, output, transformation, and feedback) compared to organizational goals. Research on organizational performance has continued to grow since the discussion about the effectiveness of organizational management has grown. It starts from determining the definition of organizational performance, developing indicators that measure organizational success, and developing organizational performance models. The variables and indicators that build the model that has been proposed so far originally came from the previous literature without being accompanied by a study of the organizational context. This study uses Islamic banks in Indonesia as a case study. Islamic banks in Indonesia are considered a good prospect as a country with the most significant number of Muslims globally. However, 25 years after the establishment of the first Islamic bank, the performance of Islamic banking in Indonesia is still far from the expected potential and expected target. This study will identify internal organizational variables that affect the performance of Islamic banks in Indonesia, propose it as a model, and examine its strength. The model developed in this dissertation uses a "conceptual phase," which is adapted from Dubin's theory development method. This process includes five steps. The first phase is input, the need to develop a performance model for Indonesian Islamic banks. The second phase is to define the concept of the model by conducting preliminary interviews. The third phase organizes the relationship between concepts using a previous literature review. Furthermore, the last phase places this theory in its context, namely Indonesia, by interviewing stakeholders. The method used in this research is exploratory sequential mixed methods, qualitative and quantitative methods on an ongoing basis. The proposed model from the literature review results was tested using a qualitative approach. After there was a revision of the model, the model's strength was tested using quantitative methods with a more significant number of samples and analysed using SMART-PLS 3. The qualitative method used two stages. The first stage is a case study on three Islamic banks, namely, market leaders, market challengers, and regional banks, interviewing top and middle management. The second stage is interviews with external stakeholders, namely Islamic banks' customers, conventional banks' customers, competitors, scholars, and regulators. Quantitative methods were used to test hypotheses and models by distributing questionnaires and then analysed using statistical tools. This study yielded three main findings. First, from the literature review, an integrated model of the performance of Indonesian Islamic banking is proposed. This model explains that the performance of Indonesian Islamic banking as a dependent variable is influenced by three management variables, namely service innovation as a mediating variable and knowledge management capability and human capital drivers as independent variables. A case study then confirms the proposed model. The case study results show that the model is following the conditions in the field. The second finding is in the context of Islamic banks in Indonesia from stakeholders' perspectives. Internal stakeholders of Islamic banks mostly have a background in entering Islamic banks because of migration and belief in religious rules; of course, this adds positive values for the company. On external stakeholders, there are still issues regarding trust in Islamic banks, both in terms of the implementation of sharia (from the side of Muslims) and the services provided by Islamic banks to customers in general. Quantitative methods are used for testing the model's strength. Islamic bank performance model consists of eight hypotheses. The analysis results show four direct path hypotheses are proven, and only one is not proven. The results of data analysis on the indirect path hypothesis show that service innovation as a mediating variable is confirmed. The Q2 value of organizational performance is 0.620, which is on the threshold of 0. It indicates that the variable has been constructed correctly, and the model has a predictive power of 62%. This study has a limitation in strengthening the external validity of the developed theory or the proposed model. It needs multiple-case studies in the same settings at the other Islamic banking and further quantitative based study to replicate the findings. Based on the findings, key the managerial implications of this study are the surveyed Islamic banks need to consider aspects of the organizational performance model. This study has scientific and practical contributions to the development of organizational performance research in the Islamic banking in the Indonesian context.