Business Orientation and Innovation Capability in Improving Operational Performance

Abstract

Purpose: This research aims to better understand how Business Orientation and Innovation Capability affect Operational Performance in MSME Coffee Shops. Theoretical framework: The one of the most impacted sectors during Covid-19 pandemic is Micro, Small, and Medium Enterprises (MSME), leading to a decline in national economy, such as in coffee shops, which adopt franchise concept and are established throughout Malang City. To date, drinking coffees is perceived as more than just fulfilling needs, as it becomes a new lifestyle. Design/methodology/approach: This study, in particular, is considered as an explanatory research with a quantitative approach. Data analysis was conducted by using statistical methods based on the objectives of this study. This study applied the analytical tool of SmartPLS 3.0 to prove whether there is an effect of Business Orientation on Innovation Capability and Operational Performance at coffee shops in Malang City. Findings: The result of this research suggests that Business Orientation shows significant effect towards Innovation Capability and Operational Performance. Innovation Capability mediates the correlation between Business Orientation and Operational Performance. Innovation Capability becomes the competitive advantage for many industries due to its role in enhancing quality, efficiency, speed and flexibility. Research, Practical & Social implications: This study is a suggestion for coffee shop MSMEs to develop the innovation capability because of its role in improving quality, efficiency, speed and flexibility in a business. Based on the raised in this study, Coffee Shops in Malang are capable of innovating the products and market. Building organizational innovation is demanded to improve performance organization and strategy by conducting surveys or research on opportunities and threats, thus SMEs could make the right decisions in utilizing new opportunities. Originality/value: The value of the study that Business Orientation and Innovation Capability could serve as the drive for Operational Performance. However, entrepreneurial orientation is more significant in having the ability to innovate than those who do not have the ability in entrepreneurship. Likewise, if a company emphasizes proactiveness in its business activities, it will automatically encourage high performance but does not rule out the possibility of being universally applied seeing that MSMEs have the same characteristics.