Innovation speed and competitiveness of food small and medium-sized enterprises (SME) in Malang, Indonesia

Abstract

Purpose The purpose of this paper is to examine the role of creative destruction as mediation between the speed of innovation and competitiveness of food small and medium enterprises (SMEs). Creative destruction that is competence-based and market-based is usually done by incumbent enterprises to create barrier to entry and widen the distance with similar businesses, then the role of creative destruction as a mediation to strengthen the competitiveness is investigated. Design/methodology/approach To test this, data were collected from 161 SMEs that is the food SME population in Great Malang covering three areas namely Malang Municipality, Malang Regency and Batu Municipality. warp partial least square-structural equation modeling (WarpPLS-SEM) was applied because parameter estimation with WarpPLS-SEM is very efficient because it has greater statistical requirements than other covariant-based methods, which is more likely to deliver results that match the population condition (significant if that is in fact significant in the population). Findings The pace of innovation development is very important to improve the competitiveness of food SMEs. The idea of innovation is quickly realized and products that enter the market faster have a greater chance to improve competitiveness through profit and productivity. The pace of innovation development enhances the competitiveness of food SMEs. This study proves that competitiveness can be increased once the pace of innovation development is followed by creative destruction. Creative destruction in this case is done through increased competence and maintain the innovations that have been achieved by food SMEs. Increased business competence could be conducted through cost efficiency enhancing product quality and improving worker skill. It is conducted while maintaining the achieved innovation to strengthen the market network customer service and innovation in product packaging. The government’s role is proven not to strengthen the relationship of the pace of innovation development and competitiveness of food SMEs. The role of the government is reflected through credit facilities business licensing promotion marketing and training. These have been carried out by the government. Nevertheless, these activities do not generate widespread impact in strengthening the pace of innovation development to enhance the competitiveness of food SMEs. Research limitations/implications The main limitation of this study is that it analyzes processed foods and innovations in general. Future research should investigate one type of processed food based on the typology of innovation so as to provide more effective and efficient recommendations. Originality/value This is the first known analysis of innovation speed and creative destruction for SMEs of food sector.