The role of innovation capability in mediating the effect of customer relationship management and market orientation on SME performance

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Type of the article: Research Article

Abstract
Every developing country, including Indonesia, relies on SMEs as an important part of its economic structure. However, SMEs encounter significant problems in terms of competition on the local and global markets. This study aims to examine the mediating role of innovation capability in the relationships between customer relationship management, market orientation, and SME performance. The survey targeted 103 SMEs in the food and beverage sector in East Java, Indonesia. This is quantitative research. SEM-PLS (SmartPLS software) was used to evaluate the study model. Empirically, customer relationship management has a marked influence on the performance (p = 0.000) and innovation capability (p = 0.005) of SMEs. Besides, market orientation has a significant impact on both SME’s performance (p = 0.001) and innovation capacity (p = 0.000). The capability of innovation also has an influence on the performance of SMEs (p < 0.001). Further, the study revealed that innovation capability partially mediates (p = 0.042) the relationship between customer relationship management and SME performance, as well as the relationship between market orientation and SME performance (p = 0.002). Therefore, the findings reveal that customer relationship management and market orientation in SMEs in East Java, Indonesia, have direct effects on SME performance and indirect effects through innovation capabilities.

Acknowledgment
The research process would not have been possible without the Rector of Universitas Wijaya Putra Surabaya, whose support and dedication have been instrumental in the completion of this article. Support and cooperation, which might have been missed or taken for granted in the conduct of the research, are deeply appreciated. This research would not have been successful without the countless hours and contributions of many, and for that, they have my sincerest appreciation.

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    • Figure 1. Research framework
    • Figure 2. Results of the first structural model
    • Figure 3. Bootstrapping in the second structural model
    • Table 1. Demographic profile of the participants
    • Table 2. Descriptive statistics
    • Table 3. Construct reliability and validity
    • Table 4. R Squared
    • Table 5. f Squared
    • Table 6. Construct cross validated redundancy
    • Table 7. Heterotrait-monotrait ratio and correlation
    • Table 8. Fornell-Larcker criterion
    • Table 9. Direct and indirect effects
    • Conceptualization
      Mei Indrawati, Indra Prasetyo, Rusdiyanto Rusdiyanto
    • Formal Analysis
      Mei Indrawati, Indra Prasetyo, Rusdiyanto Rusdiyanto
    • Funding acquisition
      Mei Indrawati, Indra Prasetyo, Rusdiyanto Rusdiyanto
    • Investigation
      Mei Indrawati, Indra Prasetyo, Rusdiyanto Rusdiyanto
    • Methodology
      Mei Indrawati, Indra Prasetyo, Rusdiyanto Rusdiyanto
    • Project administration
      Mei Indrawati, Indra Prasetyo
    • Resources
      Mei Indrawati, Indra Prasetyo, Rusdiyanto Rusdiyanto
    • Supervision
      Mei Indrawati, Indra Prasetyo
    • Visualization
      Mei Indrawati, Indra Prasetyo, Rusdiyanto Rusdiyanto
    • Writing – review & editing
      Mei Indrawati, Indra Prasetyo, Rusdiyanto Rusdiyanto
    • Writing – original draft
      Indra Prasetyo, Rusdiyanto Rusdiyanto
    • Data curation
      Rusdiyanto Rusdiyanto
    • Software
      Rusdiyanto Rusdiyanto
    • Validation
      Rusdiyanto Rusdiyanto