The Impact of Innovation Types on MSMEs Performance: Evidence from the Special Region of Yogyakarta, Indonesia
M K Ardhi, Jangkung Handoyo Mulyo, Irham, Hani Perwitasari

Department of Agricultural Socio Economics, Faculty of Agriculture, Universitas Gadjah Mada, Indonesia

Abstract

Innovation has played a critical role as an organizational practice in driving business growth, income generation, and sustainable competitiveness, especially because of its perceived impact on the development of the micro, small and medium enterprises (MSMEs) sector. Research on the relationship of various types of innovation to business performance continues to be studied by several researchers. The purpose of this study was to examine the effect of the main types of innovation, namely product and process innovation, on the performance of MSME coffee shops which are one of the potential business sectors and grow significantly in the Special Region of Yogyakarta. This study was conducted on 80 samples of MSME coffee shops which were selected purposively with convenience sampling technique and analyzed using the Partial Least Square-Structural Equation Modeling (PLS-SEM) method. The results showed that product and process innovation had a positive and significant effect on the business performance of MSME coffee shops. This finding implies that innovation is the main pillar for coffee shop entrepreneurs to create new market opportunities, be able to survive in the midst of the COVID-19 pandemic, and even be able to grow sustainably through improving the quality of products and services for customers.

Keywords: Business Performance, Coffee shop, Innovation Types, MSMEs, PLS-SEM

Topic: Social and Economic in Agriculture