Innovation in distribution channel and firm performance: The case of small and medium enterprises in Indonesia / Ferri Kuswantoro
It has been evidenced formany decades, that small and medium enterprises (SMEs) have become the major and fundamental contributors to employment generation, poverty alleviation,value added creation, and economic development around the globe. Due to the growing significance of internationalization...
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| Summary: | It has been evidenced formany decades, that small and medium enterprises (SMEs) have
become the major and fundamental contributors to employment generation, poverty
alleviation,value added creation, and economic development around the globe. Due to the
growing significance of internationalization, engagement in export hasdevelopedamong
SMEs for seeking natural growth. Literature on export has shown that the effectiveness and
efficiency of distribution channel have become critical issues for export performance.
Whilst acknowledging that the characteristics of distribution channels is generally difficult
to change once established, findingsfrom previous studies have strengthen the indications
that firm performance is also governed by affiliation among channel members on managing
coordination, avoiding conflict, achieving sales and profit, exchanging information, trusting
and holding commitment, as well as how the applications of non formal channels, position
of channel members; multiple distribution channels’ establishments; importers linkage
establishments; and decentralization. The importance of innovation, including innovation
in distribution channels as the driver of performance, is inconclusive. Additionally, such a
study is extremely limited in SMEs. Therefore, this study examines the impact of
innovation in distribution channel activities upon firm performance. Based on the existing
literature gap, a special attentionwas given to the mediating role of distribution channel
performance in the relationship between distribution channel innovation and firm
performance of SMEs.This study used a sample of 120 collectedexport-oriented
agriculture-based SMEsin DIY province and the surrounding areas of the Central Java,
Indonesia. A hierarchical regression analysis was used to estimate the distribution channel
innovation-firm performance model. Clearer findings of this study showed how the
innovations led to firm performance. It was indicated that innovation in assortment,
information sharing, and transportation coordination led to greater firm performance. The
result of the studyalso showed that distribution performance mediated the relationship
between innovations in assortment, information sharing and transportation coordination,
and firm performance. This empirically proved that the effect of innovation on the
performance of SMEs is strongly significant when distribution performance is enhanced
through such an innovation. Thefindings and implications supportthe existing theory of
transaction cost, depot theory, individual perspectives of innovation, and resource base
view, which give clues for stake holders and the entrepreneurs how to engage in the
innovations. It could grant challenges for the SMEs worldwide |
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