Defense industry business performance model in developing countries

Abstract

The defense industry is vital to supporting a country’s defense, especially in the modern era. While many emerging and developing countries are capable of producing military goods and services domestically, they remain dependent on foreign inputs to varying degrees. Yet, several studies have examined factors that can affect the self-reliance of the defense industries in developing countries. Therefore, the present study aims to examine factors that can explain business performance variation of defense industries in developing countries. It investigates further the business model innovation mediation for the first two factors of business performance. Data have been collected from 70 defense industrial companies in Indonesia. The Partial Least Squares-Structural Equation Modeling method is used to analyze the impact of high-performance work systems, technological innovation, and business model innovation on the business performance of industrial companies. The results show a significant effect of implementing High-Performance Work Systems and Technological Innovation through Business Model Innovation on Business Performance (accounted for R2 = 0.67). The research findings are expected to encourage defense industries in developing countries to focus on implementing human resource practices and adopting new or improved technologies and research results at all levels of management following business model adjustments.