Strategic Alliances: Building the Competitive Advantage of Rural Banks in Indonesia

Abstract

This paper highlights the determinants of rural banks’ competitive advantage, which has decreased due to Fintech and limited office networks. In industry 4.0, limited office networks can be replaced with digital services to reach public services by proposing digital innovation and business digitalization variables to encourage strategic alliances and increase the competitive advantage of rural banks. Three variables was tested using SEM-PLS: competitive advantage, stratefic alliance, and digital innovation and business digitalisation. Data from 151 rural banks were collected using questionnaires to test the relationship amongst the variables. The results show that business digitalization’s impact on competitive advantage is significantly positive. Strategic alliance mediates the relationship between digital innovation and business digitalization with competitive advantage. However, digital innovation does not directly support competitive advantage. Keywords: digital innovation, business digitalization, strategic alliance, competitive advantage