The Role of Innovation Management and Business Strategy to Boost the Sustainable Performance of Islamic Bank in Indonesia

Abstract

Purposes: In terms of asset share and market share, Islamic banks in Indonesia continue to perform worse than conventional banks. This contrasts with the majority Muslim population in Indonesia. Considering, this research is aimed at investigating the influence of innovation management and business strategy on the performance of Islamic banks in Indonesia.    Theoritical Framework: This study employs a causal research approach. With a quantitative methodology and cross-sectional data collection, explanatory research was conducted. Exogenous variable in this research is innovation management and business strategy. The endogenous variabel in this reasearch is Sustainable Islamic Bank Performance.   Design/Methodology/Approach: This study's unit of analysis is the Islamic banking service industry. The survey includes a sample of 197 Islamic banks., including Islamic Commercial Banks, Islamic Business Units, and Islamic People Financing Banks, according to data from the Financial Services Authority (OJK). The unit of observation or respondent is the management/top management of each of these banks. The number of samples taken was 75. The measurement scale employed an ordinal scale based on the Likert technique. For data analysis, the SEM (Structural Equation Modeling) technique was utilized.   Result: Business strategy and innovation management have a significant impact on the sustainable performance of Islamic banks in Indonesia, according to the results of a test of hypotheses. Innovation management has a greater impact on the performance of Islamic banks than business strategy.   Research, Practical and Social Implications: The managerial ramifications of this study's findings are that the management of Islamic banks must reconsider and reformulate their business strategies to be more in line with current conditions, as well as develop innovative management in line with the ever-changing technological trends.   Originality/Value: The novelty of this study is that innovation and strategy in Islamic Banks are important aspects that empirically influence the sustainability performance of Islamic Banks. Aspects of innovation and strategy are important when managing Islamic Banks so that they can grow and obtain positive profits.