THE EFFECT OF EXTERNAL AND INTERNAL FACTORS ON ECO-INNOVATION ADOPTION IN THE FASHION INDUSTRY: A RESEARCH ON INDONESIA MSMES

• Main Author: Kemas Sudirman, Melati
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/68314
• Institution: Institut Teknologi Bandung

Competition in the business environment is becoming increasingly fierce and complex due to globalization, technological advancements and the transition to a knowledge-intensive economy. This competition forces companies to innovate by integrating external and internal resources. Today, the concept of innovation is experiencing the societal transformation that introduces environmental and transformative innovations called eco-innovation. This concept has the potential to be adapted in Indonesia given that the manufacturing sector, especially the fashion industry, produces waste that can threaten environmental sustainability. Therefore, this research will examine whether dynamic capabilities and various combinations of collaborative relationships can have complementary consequences for the adoption of the concept of eco-innovation. This research aims to determine the impact of external and internal sources on the adoption of eco- innovation by taking into account respondents' perceptions of innovation in the fashion industry. This research uses the Partial Least Squares Structural Equation Modeling (PLS-SEM) approach to assess and estimate correlations between variables. Data analysis shows that both external and internal factors contribute to the adoption of eco-innovation by MSMEs. The results of the data processing show that coercive pressure, mimetic pressure and environmental capability have a positive effect on the acceptance of eco-innovations in companies. In addition, government support and regulation are seen as an influencing factor on eco-innovation practices, although the implementation of the concept of eco-innovation is still in its acquaintanceship and still needs more support and of resources. The main objective of this research is to show how MSMEs in the fashion sector can gain a competitive advantage by adopting a sustainable approach and the research provides evidence that the application and implementation of eco-innovation practices play an important role in creating reputation of a company to be able to compete in the market. The survey is limited to small and medium-sized business owners only as key informants. The population in this research are Indonesia people who have businesses while the sample of this research is focused exclusively on MSMEs owners in fashion industry. Despite all the limitations of this research, it is necessary to recognize that the results depend on the factors originally used in this study and may have other drivers of eco-innovation that were not addressed in this study. Therefore, as a suggestion for future research, this topic can be explored on a larger scale and can be searched to include other related databases. This research framework can be used in other sectors as it targets MSMEs operating in emerging markets with a global need for environmental protection. Furthermore, further research can examine the mediating effect of green management practices on eco-innovation patterns by comparing influential innovation activities between MSMEs and large companies.