Competitive Pressure and Business Performance in East Java Batik Industry

Abstract

This study aims to assess the impact of competitive pressure and innovation capability on business performance in small-and mediumsized enterprises (SMEs) in the batik industry in East Java, Indonesia. Furthermore, this study explores the impact of competitive pressure on business performance through innovation capability as a mediating variable. This research was quantitative using primary data with questionnaire as a method of sampling collection. The measurement of the variables was captured using Likert scale. The respondents were small-and medium-sized enterprises (SMEs) in the batik industry in East Java Province, Indonesia. The sample totaled 254 subjects. The data analysis was done using SEM-PLS. The results of the study show that: 1) there was a positive direct impact of competitive pressure on business performance; 2) competition pressure positively influences innovation capability; 3) innovation capability positively influences business performance; and 4) innovation capability has a partial mediating role in the effect of competitive pressures on business performance. The findings of this study suggest that managers in SME's batik industry should increase their effort to cope with the high competitive pressure to increase the innovation capability, so that they can have an advantage to face successfully competitors, leading to higher business performance.

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“…The results from Study 1 and Study 2 reported an opposite and significant relationship between competitive pressure and firm performance. Study 1 presented that competitive pressure positively affects firm performance, which is in line with most past studies [ 21 , 108 , 109 ]. And, a few studies reported there is no significant relationship between competitive pressure and firm performance [ 110 ].…”

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“… Soewarno et al (2020) defined competitive pressure as the level of competitive atmosphere in the industry, and Alaskar et al (2021) defined competitive pressure as the pressure felt by the industry to remain competitive. In this study, competitive pressure is defined as the level of pressure felt by the textile industry from its peers to remain competitive, and the level of competitive atmosphere.…”

“…Soewarno et al (2020) defined competitive pressure as the level of competitive atmosphere in the industry, andAlaskar et al (…”

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“…Competition pressure is the level of competition in the business sector (Soewarno et al, 2020). According to Bernard et al (2006), competitive pressure arises when companies compete with competitors on the commodities market through frequent competitive interactions with other firms seeking to win customers, raise market shares, or struggle for survival.…”

“…Additionally, Soewarno et al (2020) reported that when there is a high degree of consumer demand, companies are more likely to pursue creativity, than when there is a low level of competition, resulting in higher transformative adoption. Turner and Endres (2017) advised that entrepreneurs must continue their survival efforts in the face of environmental change and competitive pressure because competition pushes entrepreneurs to think more creatively to outperform their rivals, resulting in revolutionary creativity.…”