The Importance of Interfirm Networks in Enhancing Innovation Capability and Exporting in High-Tech Industry

Abstract

This study investigates how interfirm networks affect firm performance through a multi-mediation model of innovation capability and exports in the context of high-tech industries in Indonesia as one of the emerging economies. As part of domestic and international business networks, the firm can benefit from various forms, such as being a supplier to another firm in the next value chain, learning external knowledge, resource sharing, and, in turn, increasing firm performance. However, there is no guarantee that firms engaging in the interfirm network will increase their performance through innovative capability and internationalization through exporting activities. This study utilizes the large and medium manufacturing industries 2017 dataset from an annual survey conducted by Statistics Indonesia. We created a total sample of 2,578 firms from 7 industries in Indonesia's high-tech industries based on two-digit International Standard Industrial Classification (ISIC) manufacturing industries. By employing Structural Equation Model (SEM) – Path Analysis, this study found that the interfirm network positively and significantly affects the firm's performance. Meanwhile, a significant but not unidirectional effect was found in the relationship between interfirm networks and innovation capability, as well as innovation capability on firm performance. Export plays an important role in improving the company's performance, either directly or as a mediator. However, the mediating effect of innovation capabilities and export activities on interfirm networks and firms' performance is much smaller than the direct effect of interfirm networks on firms' performance. Doi: 10.28991/HIJ-SP2022-03-05 Full Text: PDF