MACRO AND MICRO ENVIRONMENTAL PERSPECTIVE ON THE INNOVATION AND PERFORMANCE OF SME

BUSINESS DEVELOPMENT

MARIYUDI

Background

The competitive environment in most countries and companies has changed because production has
changed to become more technology-based and knowledge-based, while competition has globalized
and developed to be more innovation-based (Mytelka, 2000; Szirmai, Naude & Goedhuys, 2011). To be
able to survive in today's global market economy and achieve long-term success, companies are
required to adapt and continue to innovate to be able to overcome intense competition and in
accordance with changing market demand (Tucker, 2002; Cefis & Marsili, 2005; Brem & Voigt, 2009;
Hertog, 2010; Ellonen, Jantunen & Kuivalainen, 2011). Even small and medium businesses need to look
for new business models and strategies, introduce new products and services that are better and
consider new knowledge and technology (Hadjmanolis, 1999; Chirico & Salvato, 2008). Innovation is
considered important for business growth (Dougherty & Hardy, 1996; Drucker, 2003; Haour, 2004;
Davila, Epstein &

Shelton, 2006).

Aim

The specific objectives of this research study are: to provide new insights into innovation development
activities from emerging markets (macro-environmental perspectives); to get a better understanding of
the capabilities and practices of SME innovation (microenvironmental perspectives); and to determine
the impact of corporate innovation on the performance of SME business growth. Independent variables
are factors that are driven externally (government-supported developments, financial resources,
academic-industry collaboration, and market dynamics) and factors that are driven internally
(management orientation, organizational culture, technological orientation, alliance and cooperation ,
and market orientation). The mediating variable is company innovation and the dependent variable is
the performance of business growth

Method

The approach used in this study is a quantitative approach, with consideration based on the research
objectives, models, and hypotheses developed. Quantitative approaches enable researchers to build
statistical evidence on the strength of relationships between variables (Malhotra, 2004; Zikmund &
Babin, 2007). The survey method is used to collect data because it has many advantages (Kumar et al.,
1999; Hair et al., 2006; Sekaran, 2005; Zikmund & Babin, 2007).

Research result
The survey research strategy by distributing questionnaires was selected to test 330 data samples from
Small and Medium Enterprises using disproportional stratified sampling techniques in which 325
questionnaires were returned, 324 questionnaires could be used, and one questionnaire was incomplete
or damaged. Allocca and Kessler (2006) argue that an effective sample of 324 can be processed at a later
stage, representing 98.18% of the total questionnaire distributed (Sekaran, 2003). The results of the
demographic characteristics of the respondents showed that the majority of respondents were male
(77.16%), aged between over 40 years (33.33%), married status (87.96%) and positions as President
Director / General Manager / Owner (73.15 %). As

Conclusion

Innovation can be an integral activity involving all SMEs and behavioral conditions, which are more
related to the ability of SMEs to find and find new, better ways to identify, obtain, and implement ideas.
For innovation to be present in a business, SMEs need to grow the external and internal environment
and the determinants and driving forces in order to provide a deeper understanding of the innovative
potential and innovative activities in a sustainable manner. This research further contributes to the
marketing and innovation management literature by analyzing data from the Indonesian region,
specifically the Province of Aceh. The government is expected to be able to set national innovation
plans, policies and support programs with more attention to SME activities. This can be done with
specific reforms directed at efforts to increase national competitiveness through innovation in each
region with different approaches related to infrastructure, institutional support, legal instruments and
regulatory frameworks, funding mechanisms, education and capacity building for business actors and
market structures which side with the business actors.