The role of technology capability in supporting firm performance in the high-tech manufacturing industry

Abstract

Background: Technology has influenced many aspects of life, particularly in the digital era of today. Companies that are closely related to technology are also challenged to keep innovating to stay competitive in the market, especially the higher their technology intensity their products and services are related. This study focuses on examining the technology capability of high-tech manufacturing firms in Indonesia. According to the International Standard Industrial Classification, high-tech manufacturing firms are firms that manufacture computer, electronic, and optical products. The aim of this study is to identify the role of technology capability that influences a firm’s performance and identify whether the value chain mediates the relationship between technology capability to firm performance. Methods: The method used in this study is descriptive quantitative analysis, using multi-linear regression and path analysis to test the hypothesis. The data used in this study is secondary data that came from Badan Pusat Statistik (BPS), Indonesia's official statistics agency. The survey data used in this study comes from Indonesia's annual survey of manufacturing firms in 2017. Result: Technology capability and value chain have significant effects on firm performance. Nonetheless, the value chain as an intervening variable has no significant effect on firm performance. In other words, with or without technology utilization of the value chain, both produce similar results. Conclusion: Firms in the high-tech manufacturing industry are expected to have sufficient knowledge and capability in utilizing their technology resources to ensure the firm's long-term viability and to enable them to continuously create innovations, which leads to improved firm performance and thus to their competitive market survival. By identifying the effect of the value chain as an intervening variable and identifying the difference between direct and indirect effects, this study also adds to previous research on the effects of technology capability and value chain on firm performance.