Challenges and Strategies for Management and Business Education: Addressing the Case of Relevance

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The 2015 International Conference of Management Sciences (ICoMS 2015) Thursday, April 23 2015 Universitas Muhammadiyah Yogyakarta, Indonesia Chair Person Retno Widowati PA, Ph.D Reviewers: 1. Prof. Shu-Hsien Liao (Tamkang University, Taiwan) 2. Prof. Dr. Zainal Abidin bin Mohamed (USIM, Malaysia) 3. Prof. Dr. Heru Kurnianto Tjahjono (Universitas Muhammadiyah Yogyakarta) 4. Assoc. Prof. Dr. Kalsom Abdul Wahab (USIM, Malaysia) 5. Assistant Prof. Dr. Thanet Wattanakul (Khon Kaen University, Thailand) 6. Dr. Nattanin Ueasin (Khon Kaen University, Thailand) 7. Dr. Indah Fatmawati (Universitas Muhammadiyah Yogyakarta) 8. Dr. Masyhudi Muqorobin (Universitas Muhammadiyah Yogyakarta) 9. Retno Widowati PA, Ph.D (Universitas Muhammadiyah Yogyakarta) 10.Dr. Nano Prawoto (Universitas Muhammadiyah Yogyakarta) 11.Dr. Rizal Yaya, Ak., CA. (Universitas Muhammadiyah Yogyakarta) Moderators: Room A: Dr. Indah Fatmawati Room B: Dr. St Dyah Handayani, MM & M. Imam Bintoro, S.E., M.Sc. Room C: Dr. Rizal Yaya, Ak., CA Room D: Prof. Dr. Heru Kurnianto Tjahjono Web Operator Assistant: Pradita Ningrum Administration Assistant: Nur Adawiyah i The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia Preface ICoMS 2015 The 2015 International Conference on Management Science April 23 2015 Universitas Muhammadiyah Yogyakarta, Indonesia Dear Presenters and Delegates, Department of Management, Economics Faculty, University of Muhammadiyah Yogyakarta, in collaboration with the Khon Kaen University Thailand, USIM Malaysia, Tamkang University in Taiwan, organized an International Conference which will be held on December 23 April 2015. We are proud to know that there is a thick manuscript submissions came to our table for this conference. In detail, there are 36 international academic manuscript which we received from Indonesia, Malaysia, Thailand, Taiwan. Our international conference is a manifestation of the Government of Indonesia through the Directorate General of Higher Education, which has encouraged the internationalization of research and teaching in order to foster high-caliber academic institutions globally and increase competitiveness in Internasional Higher Education. We are very confident that our presenters and delegates will get a lot of ideas together and experience of this conference. In addition, our participants will enjoy additional insight from our plenary session keynote speakers, namely, Prof. Zainal Abidin, Ph.D. from USIM Malaysia, an international Strategic Management expert. Through this conference, we are committed to promote and improve our mission and academic culture synthesize global progress with local knowledge. Therefore, it is my great honor to welcome you to ICoMS 2015 in great cultural city of Yogyakarta, Indonesia. I look forward to seeing you soon in the conference. Best wishes, Retno Widowati PA, Ph.D. Chair of ICoMS 2015 http://icoms.umy.ac.id/call-for-papers ii The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia TABLE OF CONTENTS The 2015 International Conference of Management Sciences (ICoMS 2015) Thursday, April 23 2015 Universitas Muhammadiyah Yogyakarta, Indonesia No Article Reviewers & Moderators Opening Remark Table of Contents Room A Page i ii iii 1 Moderator: Dr. Indah Fatmawati, M.Si. 1 Value Creation of SMEs Through Relational Capabilities 2 2 3 Building Favorable Destination Through Branding Capability The Effectiveness of the use of internet marketing in Batik industry in Giriloyo Bantul, Indonesia Marketing Campaigns Grounding Ambidexterity: Mandatory Skill of Salesperson Developing the Selling Relationship Quality to Improve the Performance of Sales Person in Pharmaceutical Industry in The Daerah Istimewa Yogyakarta Consu er Consu ption of Dates and Goat’s Milk: An Exploratory Study The Moderating Effects of Need For Cognition on Framed Message Promoting Electricity Energy Saving Behavior 14 20 Room B 81 4 5 6 7 27 37 48 66 Moderator: Dr. St Dyah Handayani, MM, & M. Imam Bintoro, S.E., M.Sc. 8 9 10 11 12 13 Strengthening Salesperson Performance Quality of Mesmerizig Business Offering to Winning Customer Heart Flexibility Networking Capability, Entreprenenurial Oerientation on Business Performance An Analysis of Antecedents and Consequences of Brand Commitment the Empirical Study on Branded Laptop In Indonesian The Impact of Communication Effectiveness And Service Quality on Relationship Commitment Gaining Competitive Advantage through Business Process Reengineering (BPR) The Influence of Management Information System E-Learning to Net Benefit in Yogyakarta Private University Using Delone and McLean’s 00 Model 82 89 96 110 117 129 iii The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 14 The Effect of Product Attributes, Price, Need for Variations and Consumer Dissatisfaction on Brand Switching Behavior of Face Cream Product Brands in Yogyakarta, Indonesia 137 Room C 145 Moderator: Dr. Rizal Yaya, Ak., CA 15 16 17 18 19 20 21 22 Challenges and Strategies for Management and Business Education: Addressing the Case of Relevance Release of Sbi Interest Rate and Stock Trading Volume on the Herding Behavior of Indonesian Investors Waqf Manejemen and Administration: Role of State Islamic Religious Cauncil Negeri Sembilan (MAINS). Malaysia Development in Northeast Regional Thailand: A Case Study National Economic and Social Development Plan Integration Of Halal Compliance and Islamic Financing: Analysis of Industries In Malaysia Key Succes Factor Performance Balanced Scorcard: Effect of Public Service Quality And Good Governance on The Performance of Public General Hospital of Cilacap (Survey in Cilacap District General Hospital) Muslims Participation in cash waqf : the Case in malaysia 146 Room D 197 156 166 173 179 185 193 Moderator: Prof. Dr. Heru Kurnianto Tjahjono 23 24 25 26 27 28 29 Antecedents and Consequences of Service Culture in The Public Sector Services Company in Bengkulu Structural Equation Modeling Qorganizational Culture, Internal Marketing and Knowledge Management in Private Hospital Company in Bengkulu Unified Knowledge Sharing as Antecedent to the Implementation of Organizational Innovation Organizational Commitment Among Professions Mediating Role of Job Satisfaction on Effects of Compensation Distributive Justice, Compensation Procedural Justice, Person Organization Fit (PO-Fit) on Organizational Commitment Analysis the Influence of Quality Work Life on Job Satisfaction and Employee Performance The Influence of Islamic Work Ethic on Organizational Commitment with Intrinsic Motivation and Job Satisfaction as an Intervening Variable 198 206 214 221 227 236 242 iv The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia Room A Moderator: Dr. Indah Fatmawati, M.Si. Paper ID MP.001 : Value Creation of SMEs Through Relational Capabilities Nur Yakin & Mulyo Budi Setiawan Paper ID MP.004 : Building Favorable Destination Through Branding Capability Jasanta Peranginangin Paper ID MP 25: The Effectiveness of the use of internet marketing in Batik industry in Giriloyo Bantul, Indonesia Mohammad Rianda Al Rasyid, Retno Widowati PA, & Misbahul Anwar Paper ID MP 012: Marketing Campaigns Grounding Ambidexterity: Mandatory Skill of Salesperson Dwi Suryanto Hidayat Paper ID MP 016: Developing the Selling Relationship Quality to Improve the Performance of Sales Person in Pharmaceutical Industry in The Daerah Istimewa Yogyakarta Ida Bagus Nyoman Udayana Paper ID L.106: Consu er Consu ption of Dates and Goat’s Milk: An Exploratory Study Asmaddyharis, Zurinakefeli, Sitinuraziramohddaud, Nurulaini Muhamed, Nursilahah Mad, & Syadiyah Abdul Shukor Paper ID MP 022: The Moderating Effects of Need For Cognition on Framed Message Promoting Electricity Energy Saving Behavior Indah Fatmawati The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 1 VALUE CREATION OF SMEs THROUGH RELATIONAL CAPABILITIES Nuryakin1, Mulyo Budi Setiawan2 1 Ph.D Program Marketing of Diponegoro University, Semarang (norsbri@yahoo.com) 2 Ph.D Program Marketing of Diponegoro University, Semarang (mulyobudisetiawan@gmail.com) ABSTRACT This paper reports the empirical research findings on the study of relational capabilities (RC) and identify the effect of value creation (VC) and customer response capability (CRC) to enhance business performance in the context of SMEs. This paper developed and investigated the research gap of the effect of relational capabilities on business performance. This article will also contributes to the debat and other perspective on the impact of relational capabilities on business performance. Data were collected from 154 SMEs of the Wooden Furniture Cluster in central Java, Indonesia. After validating with the Confirmatory Factor Analysis (CFA), SEM analysis was applied to measures the direct and indirect effect of relational capabilities on business performance of SMEs. The results show that there are positive impacts of relational capabilities on business performance, and value creation. In addition, the impact of customer response capability on business performance and value creation was also positive. And in addition, the results also show a positive impact between value creation on business performance. The implications of the results is discussed under future research section. This article will also contributes to the debat and other perspective on the impact of relational capabilities on business performance. Keyword : Relational Capabilities, Customer Response Capability, Value Creation, Business Performance. Backgroud to the Research Asean Economic Community (AEC) 2015 has become a current issues on the business and science. The issues is a very important activities to develop of an region through economic change and business competitiveness, moreover, on the Small Medium Enterprises (SMEs) to enhance international market performance. A previous studies of the role small and medium enterprises (SMEs) explains how relational capabilities can enhance a capacity of customers in a domains international market (Zohdi et al. 2013; Roy 2012; Hormiga et al. 2011; Fazli et al. 2013; Daou et al. 2013; Agndal and Chetty 2007a; Abiola 2013). Cooperation with others relationship in the small and medium enterprises (SMEs) can be develop networking capability and achieve superior performance (Roy 2012). Furthermore, the empirical investigations have shown the issues of small medium enterprises to develop relationship marketing. Within the SMEs perspective Agndal and Chetty (2007b) investigate how social relationship in the contexs market turbulence in international performance. Therefore, the limitation of resources SMEs look for cooperative relationship with foreign partners. The determinant of relationship capabilities of the small and medium enterprises (SMEs) in international markets has been discussed in the previous study. Based on literature review the role of business networking and customer orientation is a antecedent of business performance (Taghieh et al. 2013; Roy 2012; Raza 2012; Mu et al. 2008; Mitrega 2012). The others study described that relational capabilities is a power injection to customer value creation and innovation performance (Ngugi et al. 2010). Relational capabilities is a multidimensional construct, but it is difference aspect on a business contexs. For example Mitrega (2012) described relational capabilities is internal factors in the organization to achieve customer value creation by a quality of relational. Furthermore, the quality of relational is a dominant factor to enhance a superior performance. In the other perspective, the role of small and medium enterprises (SMEs) through networking capabilities with a business association is a power to achieve the international market (Matthyssens et al. 2008; Hutchinson et al. 2006; Benedetto and Song 2003; Acedo and Casillas 2007). But, on the other argue the resources and the limited number of sources of funding and made problems in the small and medium enterprises. That problem is the control made for the sme practitioners develop their business. Porter (1985) explains that companies must be strength production capabilities to specificity and be able to market performance. One of the efforts to creating of the superior product can be creating the The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 2 value of products and product innovations that are a could be identified (Solitander and Tidström 2010; O'Cass and Sok 2013). Moreover, differentiation is a becoming company to effort and ability the value of product and services at the superior prices in the contexs barrier in the market entry by low cost and competitive, unique or superior. Barney (1991) asserts that firm develops sustainable competitive advantage by leveraging the internal resources that its posses. Furthermore these resources are described as unique, rare, nonsubstitutable and difficult to imitate by rival firms, and included all assets and capabilities. In the business and environment turbulence perspective, others organization not regard the produced by strategic resources to implementing a strategy. Yeniyurt et al. (2005) investigate the role and important organization to entry the global market. The organization have competence in the knowledge and resources to developing knowledge on customers, competitor, and suppliers by coordination and supply chain. The impact of relational capabilities on business performance is a debateble in the others perspective. Some evidence the other research of the impact capabilities is not supported to business performance. For example, Moen et al. (2008) argued the utilization of technology especially to search information have a negative relation on satisfaction in the new market knowledge development. The others study explain interfirm cooperations is a negative impact on business performance James G Combs and Jr (1999). The aims of this study is to empirically study the concept of value creation to fulfill a gap research relational capabilities on business performance. This study is a testing the concept of value creation to a bridging variable on enhance business performance. Value creation is the concept in the organizational by ability and created value added in relational organization by networking mutually. Review of Literature and Hypotheses Development relational capabilities, and customer response capability. In this study was also literature review to a prove the concept of the value creation and to fulfill and solutions the results of gap research between relational capabilities to enhance business performance. Value Creation and Business Performance To create new or better products, firms need to reallocate resources, to combine new resources, or to combine existing resources in new ways (Tsai and Ghoshal 1998). The study of Porter (1985) develop a basic theories of a value chain. Porter analysis in the value creation on business level. Therefore in the study analysis of a value chain explore the main activity company, having the direct effect on value creation, and support program to impact of value and enhancing performance. Moreover, Porter analysis explain the value can be created a differentiation through activities to make a products and services to impact on superior performance. Based on previous study we can described the creation of the organizational was the variables of the determinants of the business innovation (O'Cass and Sok 2013). The role of manager and the employee is very important for the value creation. The results of the study shown the innovations have a positive effect on the firm ability to offering a values and enhancing business performance. Clarke and Fuller (2011) describe the role of the social partnership in the inter firm relationship which a strategic collaborative focused on organization performance. The study is to develop a value creation in the small and medium enterprises (SMEs) in the furniture exsport oriented industry is Central Java. Value creation of products for SMEs is accumulation from a SMEs with the buyer, suppliers and manufacturing enterprises through internal resources development. The value creation process on a SMEs of furniture industry in Indonesian can be seen in the figure 1. The theoretical review in this study based on theories about the value creation, business performance, The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 3 Figure 1. The model: Value Creation of SMEs Furniture Value Created :    Market information, Product innovation  International Standaritation, Price competition Value Created : Skill , Competence Capability, Ability  Ekperience Resources Buyer Value Creation of SMEs Supplier Value Created :  Production supported material, Quality of material  As can be observed from Figure 1, we include the value creation of SMEs furniture of the 4D-model and have positioned this in the centre of the model. The idea that the essence of producing a SMEs is to provide a solution or an experience can be traced to several authors. The 4D-model inside a relational SMEs with resources, buyer, supplier, and the manufacture. The others studies explained that creation is a key in product innovation to achieve business performance (Viljakainen and Toivonen 2014; Sørensen and Jensen 2015; Lefaix-Durand et al. 2005; Gurau 2004). For example, Gurau (2004) explained that the concept of the value creation is related to internal activities in a value creation for customers. Consist of internal activity to design product, market, supply chain and others activities to support product creation. Lefaix-Durand et al. (2005) explains the model interfirm relationship and value creation. The model of value creation process can be develop through a process of cooperation in internal business. Interfirm relationship are at the very core of new trends in the present business environment, trends such as market orientation, time based competition, supplychain management, strategic partnership on business. Banyte and Dovaliene (2014b) investigate the relations between customer engagement into value creation and customer loyalty. Moreover, the study is result showed that relations between customer engagement with value creation and customer loyalty are analysed in an integrated manner through direct and indirect relation between the two constructs. Based on previous studies, and literature review we proposes: H1 : The higher of the value creation, the higher will the business performance be for the SMEs. Manufacture Value Created :  Production quality, Job Order  Product Legal  Relational Capabilities, Value Creation and Business Performance The importance of relationship capabilities to firms of small size in international markets has been highlighted in the literature. Specifically, building a strong and close partnership or also known as relationship quality to developing the competitive ability of small businesses (Ismail et al. 2014). Relational capabilities is an important assets in the internal resources capabilities contexs (Zohdi et al. 2013; Ngugi et al. 2010; Hormiga et al. 2011; Fazli et al. 2013). Relational ability relating to focused on achieve a access knowledge, supporting innovation and the creation of a competitive advantage (Smirnova et al. 2011). Moreover, relational capabilities has assumed a exchange business relationship and an effort to develop information specific and the relationship of the business through the other knowledge. Day and Van den Bulte (2002) define relational capabilities is a organization ability to communication, coordination and manage business interaction. Furthermore, the aspect of relational capabilities is internal capabilities issues in the future study. The concept of relational capabilities describe three dimention, the configuration process ability, customer response capabilities, and business controlling ability ((Dyer and Singh (1998), Jacob (2006)). Relational capabilities is a current issues on the interaction business. For example Ayios (2004) studies has focused on understanding the behavior of relational the ability of organization and the role of corporate culture in the business relationship .This has a strength perspective that the role of the relation of inter relationship to be a very important. In other studies Butler and Purchase (2008) explained the effort to create trust among organization, but the higher levels of interpersonal organization. The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 4 Resource based view (RBV), internal capability determine the root of sustainable competitive advantage an organization (Barney 1991). For example internal capability is a brand legality, technology knowledge, and skills of production that is a difference by competitor (Lee et al. 2001). The resources capability can be applied to technological organization, for example in the others studies ((Moen et al. 2008), (Lin and Chen 2007; Ismail and Mamat 2012; Mohannak 2007)). Dakhli and De Clercq (2004) examines the effects of dimention of social capital in the relational capabilities contexs, such as human capital and social capital in the value creation of the business by innovation. The study using concept a social capital by trust, the relationship of business, norms and behavior to testing the relationship between of social capital and innovation. Smirnova et al. (2011) asserts the relationship of market orientation in the development of relational capabilities and the business performance that shown that market orientation as to customer orientation dimensions, influence positive on relational capabilities. Relational capabilities influence in a business performance. Lee et al. (2001) explain the relation between internal capability and external networking can achieve business performance. The results of regression models shown three dimensions of the impact of internal capability on the innovation performance. The interaction between internal capability based on partnership relationship can enhancing on performance. Customer relationship, relational with supplier, interfirm networking and corporate reputation can achieve of the successfull of the business performance (Hormiga et al. 2011). Borchert and Bruhn (2010) concluded that human capital, relational capital, team performance and size of company can influence on business performance. Based on previous studies, and literature review we proposes: H2 : The higher the relational capabilities, the higher the business performance will be for the SMEs. Relational capabilities can impact value creation of product based on customer orientation and develop business networking (Zohdi et al. 2013; Ngugi et al. 2010; Lee et al. 2001; Fazli et al. 2013; Elango and Pattnaik 2007). Ngugi et al. (2010) asserts relational capabilities can creation by human relational capability, technological relational capability, managerial systems relational capability, and cultural relational capability. The other studies Lamprinopoulou and Tregear (2011) finding that horizontal relationship between the manufacturer of SMEs to marketing performance. Ural (2009) asserts the positive effect share information in the financial performance of export and satisfaction with effort exports; long-term orientation in the financial performance of export, export performance and satisfaction; and relations of satisfaction with financial performance, strategic performance and satisfaction. Zohdi et al. (2013) explain the needs and customer demands of organization is essential to the a success of a organization performance. Moreover, in the dynamic market conditions and the rules of technological change, is impact on effectiveness success organization in the market. Another study conducted by Lawson-Body and O’Keefe (2006) about interorganisasional based information system can provide strategic advantage through the creation of customer loyalty. The study of Carvalho and Reis (2012) indicates the importance role of information technology in analyzing manager regarding the application of creativity and technique and relations of organization which products innovative on the market. The result consist by Jamsa et al. (2011) shown that the utilization of business networking as a source of opportunities and resources that can serve as the solution to change toward value lifetime sustainability. Based on previous studies and literature review, we proposes: H3 : The higher the relational capabilities, the higher the value creation for the SMEs. Customer Response Capability, Value Creation and Business Performance Kohli and J. Jaworski (1990) define market orientation is intelligence market which includes the generation of intelligence, dissemination of intelligence and responsiveness. They analyzed the market orientation in the level of activity in the organization. In the other perspective, Narver and Slater (1990) define the market orientation as a cultural aspects of the organization. They measure the market orientation in a rate of behavior, and defines orientation, with the dimensions of customers, the orientation of a competitor, inter-functional and coordination. Both a different approach was joined in the framework of the competence of the knowledge of the market with response to focus the process of information, customers and competitors. The measure process of customer knowledge using the ability to customer response capability (Jayachandran et al. 2004). Capabilities in response to customers in the organization is competence in satisfying the needs of customers through on the effectiveness and response to achieve the sustainability of the success of the organization performance. The dimensions of customer response as a measure in the ability to response to customers in the study is the expertise and speed to respond to customers. The organization is under pressure and a competitor relationship because of enhancing the process of adaptability and speed, as a result of globalization of the economy (Mohd Taisir Masadeh et al. 2014). Organization need a trust as a the value of special knowledge, contained in the process and procedures organization, with a pressures of globalization. This study develop dimensions customer response capability which has been used for construct The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 5 in empirical research. Customer response capability is capability organization to response to customer. The effort to understand the source of the customer value in the relationship supplier and customer as superior factors the survival of the organization (Howden and Pressey 2008). Weng and Huang (2012) investigate the impact of customer knowledge integration capability and customer relationship management to enhance new service performance. Furthermore, the research shown the positive relationship customer knowledge integration capability and customer relationship management. customer relationship management is full mediation to enhance new service performance. Based on previous studies and literature review, we proposes: performance based on trust and relationship bonding interaction. The result showed that the relationships of the managerial capabilities have a positive impact on trust. The managerial capabilities have a significant impact on networking. The study of marketing strategy in the competitiveness relationship marketing as one issues to achieve superior performance (Kanagal 2002). Relationship marketing is defined as identification, maintenance, formation and association with customers to customer value creation and the organisation of relations with others. The concept an relationship exchange can be the use of transaction cost analysis and social exchange theory. The role of relationship marketing as a increase in profitability, develop partnerships, database of customer, customers response, consumers understand, and building trust with customers. Based on previous studies and literature review, we proposes : H4 : The higher the customer response capabilities, the higher the value creation for the SMEs. O'Cass and Sok (2013) explained that the innovation capability is a antecedent of value creation of a service organization, management style, behavior an employee and marketing planning to supported innovation. The research shown that innovation capability in service organization has positive effects on the value creation offering. The impact of value creation offering is a positive relationship with the perceived of customers and positive impact on business performance. Wu and Choi (2004) investigated of reciprocity and managerial role to enhance H5 : The higher the customer response capabilities, the higher the business performance of the SMEs. In this study, a comprehensive research models is developed based on a previous study and literature review. Furthermore, the research framework, the hypotheses are developed to describe and the relationship among relational capabilities, customer response capability, value creation and business performance. The research framework is shown in Figure 2. Figure 2. The research model effects of relational capabilities on business performance H2 Relational Capabilities H3 H4 Customer Response Capability Value Creation H5 We explaine how value creation is most important to enhance business performance. The value creation is one of the bridge ability to enhance the value of a business entity at a higher performance. Therefore, the manager in a business entity will be very consern in the process and increasing performance by value creation capabilities. Method Research Framework This study was conducted based on empirical research model. Measurement of variables indicator H1 Business Performance related to the concepts or constructs that have been developed and proposed to build hypotheses must meet standards of validity and reliability criteria that have been used by many researchers. The empirically concept in this study is the impact of relational capabilities, value creation, customer response capability on business performance. The object of this study consists of SMEs that conduct interorganizational relationship with other organization in the furniture industry of Central Java Indonesian. The unit analysis of the study is owners or marketing manager, and production manager. The SMEs manager can represent the views, attitudes, The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 6 behaviors in conducting a relational capabilities in the development of value creation to gain higher business performance. Variable Definitions and Measurement To test the hyphoteses model, we designed a survey questionnaire on the basis of a comprehensive literature review to specify a set of items that ensured content validity. The self-administered questionnaire was part of a wider examination of relational capability, customer response capability, value creation and business performance. Wright et al. (2006) suggested, we adapted, modified, and extended existing scales. Because the study was conducted in Indonesian SMEs, the survey instrument was in Central Java. The face validity analysis of the questionnaire was tested in try out with managers or owner furniture SMEs. Then we distributed and collected the questionnaires. We also measured the level of implementation of business performance. This research used self-reported questionnaires to measure relational capabilities, customer response capability, value creation and business performance. Relational capabilities. Following Day and Van den Bulte (2002), we define relational capabilities is an organization ability to communication, coordination and manage business interaction. The indicator relational capabilities in this study is a inter organization approach with customer, trust in network, and mutual relationship with customer. All constructs of relational capabilities were measured with scales of multiple closed-ended items; responses were based on 5-point Likert scales ranging from strongly disagree to strongly agree. Customer response capability. Customer response capabilities is competence in satisfying the needs of customers through on the effectiveness and response to achieve the sustainability of the success of the organization performance (Jayachandran et al. 2004). The subjects were asked to indicate, on a 5point Likert-type scale, their opinion of three indicator : adaptability, speed response and accuracy to response. Value creation. Value creation is firm's interpretation and responsiveness to customer requirements via the delivery of superior performance in the value offering and as the extent of perceived value customers receive (O'Cass and Sok 2013). As in previous studies a 5-point Likert type scale was used. We develop opinion of three indicator : value added of product quality, cost eficiency and service delivery. Business performance. Business performance was the result of operational activities organization include the achieve of the internal and external outcomes (Lin and Peng 2008). The subjects were asked to indicate, on a 5-point Likert-type scale, their opinion of three indicator : sales volume, sales growth and profitability. Research data which will be collected consist of primary data and secondary data. Primary data was collected using a survey method with most sending questionnaires, in addition to some companies do interviews for respondents’ request. Questionnaire that was tested content validity and reliability then performed field trials in order to obtain improved consistency and validity of the research instrument (questionnaire). Research Sample The target of population of the study includes SMEs furniture companies operating in some provinces Indonesian. The industry is quite interesting to study because of its though competition environment and the industry has a significant role in the economic field, especially for the marketing sector. This study analyzes data at the SMEs. Both the sample and the variables used in this analysis come from the SMEs Furniture survey. The sample is representative of the population of SMEs Wooden Furniture of the Central Java, because the sampling frame was generated by a purposive sampling. A proportionate sample was taken from each SMEs furniture on the number of firms in each cluster and on the willingness of the managers or owners of the firms to be interviewed. The respondents involved in this research comprised 200 managers and owners who each had comprehensive knowledge of past and present organization practices, particularly with regard to relational capabilities, customer response capability, value creation and business performance. We collected data from SMEs in the furniture industry in three clusters located in Central Java. First, we decided on five clusters which represent the furniture industry in Central Java: (1) Furniture cluster located in Surakarta and Klaten District; (2) Handicraft and rattan cluster located in Sukoharjo District; (3) Wooden cluster located in Sragen District; Data analysis and Measurement models To test the hypothesized relationship in our models, we used a SEM. These causal relationships were captured by employing path models estimated using covariance structure modeling. The hypothetical model in SEM analysis involves two kinds of variables: observable/manifest variable; and latent/nonobservable variables. Observable variables serve as indicators of underlying constructs and latent variables are usually theoretical constructs that cannot be observed directly. For processing data by the SEM approach we used AMOS. The focal point in the analyzing path model is the extent to which the hypothesized model fits, or, in other words, adequately describes the sample data. In evaluating the fit of the model, several The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 7 The standardized coefficient is 0.248, which is statistically significant at P< 0.05 (CR =2.359). The statistical significance of hypothesis 1 confirms that the higher value creation, the higher business performance will be. Hypothesis 2 is also supported, which indicates that positive impact of relational capabilities on business performance. The standardized coefficient is 0.359, which is statistically significant at P< 0.05 (CR =3.296). The implementation will be the higher of relational capabilities, the higher the business performance for the SMEs. Hypothesis 3 is also supported, which indicates the impact of relational capabilities on value creation. The standardized coefficient is 0.639, which is statistically significant at P< 0.05 (CR =6.384). The higher of relational capabilities, the higher the value creation for the SMEs. The results also indicate the positive impact of customer response capabilities, on value creation, thus confirming Hypothesis 4. The standardized coefficient is 0.357 which is statistically significant at P< 0.05 (CR =2.951). For implementation purposes, the higher the customer response capabilities, the higher the value creation for the SMEs. Finally, hypothesis 5 is also supported, which indicates that impact customer response capability on business performance. The standardized coefficient is 0.224, which is statistically significant at P< 0.05 (CR =2.928). The implementation of a the customer response capabilities, the higher business performance. Table 1 shows al the 5 hypotheses condensed. goodness-of-fit indices were used normed fit index (NFI); comparative fit index (CFI); Tucker-Lewis index (TLI); root mean square error of approximation (RMSEA) in addition to the X2 statistic. We further evaluated measurement properties by running a confirmatory factor analysis. Following similar studies Baker. and Sinkula. (1999), e divided the variables into related groups. Each item was set to load only on its respective latent construct, and the latent constructs were allowed to be correlated. The results indicate that the measurement models have loading faktor more than 0,5. The research concluded that indicators can explained for measuring construct. Results of the Structural Model The empirically model illustrated in Figure 2 has five hypothesized relationships among the variables, namely relational capabilities, customer response capability, value creation and business performance. Figure 3 shows the path diagram resulting from the structural equation model analysis using AMOS software. The results show that all the measurements have significant loadings to their corresponding second-order construct. Overall, the model has a fit with goodness of fit index (GFI) = 0.910, comparative fit index (CFI) = 0.979, and root mean square error adjusted (RMSEA) is 0.060, which is very good. The results also indicate support for all the hypotheses. The results support hypothesis 1, which states that impact value creation on business performance. Figure 3. The relational capabilities construct formed for the SME context e7 .58 e3 X3 Relational Capabilities (RC) X2 .78 .61 e1 e9 .53 .56 X7 .76 .43 .66 e2 e8 .58 X9 X8 .76 .75 X1 e4 .32 X4 .71 .50 e5 X5 .67 .46 e6 ebp .72 1.19 .70 .30 Value Creation (VC) .52 X10 .73 .50 1.21 .74 .50 1.17 Chi-Square=68.547 DF=48 Prob=.027 GFI=.910 AGFI=.854 TLI=.971 CFI=.979 RMSEA=.060 Business Performance (BP) e10 .49 X11 .71 e11 .51 X12 .24 e12 evc .71 Customer Response Capability (CRC) X6 However, note that the relationship between relational capabilities and business performance is significant regardless of the business performance context. The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 8 Table 1. Summary of results from the SEM Relationship Value creation  Business performance Relational capabilities  Business performance Relational capabilities  Value creation Customer response capabilities  Value creation Customer response capabilities  Business Performance Conclusion and Implication Theoretical and practical implications This research findings indicates a positive relationship between value creation and business performance as well as interorganizational relationships. These findings are consistent with earlier research and theories (Walter et al. 2001; O'Cass and Sok 2013). Walter et al. (2001) argue the theoretical considerations and conceptualize value creation is as a set of direct and indirect functions of customer relationships. The functions are characterized with respect to performed activities and employed resources of a customer firm. The relational capabilities can be enhance of business performance in SMEs. Thus, studies indicate that of the relational capabilities, they have a higher business performance, support the typology proposed (Zohdi et al. 2013; Ngugi et al. 2010; M.Welbourne and Pardo-del-Val 2008). This studies asserts the relational capabilities on business performance on SMEs (Zohdi et al. 2013). Despite that result, the analysis from the internal perspective would be incomplete and it is necessary to add the relational perspective. This research is indicate a positive relationship between relational capabilities and value creation. This means that the strength relational capabilities the SMEs can enhance value creation. Based on literature review Ayios (2004) argue that a relational capabilities is Ayios (2004) studies has focused on understanding the behavior of relational the ability of organization and the role of corporate culture in the business relationship .This studies described a strength perspective that the role of the relation of inter relationship to be a very important and consist (Butler and Purchase 2008) . In other studies the effort to create trust among organization, but the higher levels of interpersonal organization. The degree of value creation makes the need for building efficient external relations more important. The results regarding the effect of relational capabilities indicate that the development of value creation may result in the relationship between internal capabilities and external capabilities becoming positive. Customer response capability is a positive impact on value creation. This studies consist at the relationship theories. The inter organization relationship is a competitor relationship and process of adaptability, as Path Coeff. 0,248 0,359 0,639 0,357 0,224 CR Prob. Hypothesis 2,359 3,296 6,384 2,951 2,928 0,000 0,000 0,000 0,003 0,003 Supported Supported Supported Supported Supported a result a organization intention to response customer (Mohd Taisir Masadeh et al. 2014). Organization need a trust as a the value of special knowledge, contained in the process and procedures organization, with a pressures of globalization. Based on literature review Banyte and Dovaliene (2014a) explain in order to reveal the relations between customer engagement into value creation and their loyalty to the company, it could be noticed that researchers interpret them differently. While investigating relations between customer engagement into value creation and customer loyalty. The results confirm that the development of customer response capability enhancing business performance. These results are in line with those of Wu and Choi (2004) asserts of mutually relationship and managerial role to enhance performance based on trust and relationship bonding interaction. The result showed that the relationships of the managerial capabilities have a positive impact on trust. Based on relationship marketing theories Kanagal (2002) define as identification, maintenance, formation and association with customers to customer value creation and the organization of relations with others. The result shown relationship exchange theories is supported by transaction cost analysis and social exchange theory can indicate of this studies. Limitations and Future Research The contribution of this research to the literature, it has certain limitations from which future research may be derived. This study does not allow for the generalisation of the results, since they can only be interpreted with regard to the subject population of the study and in the wooden furniture industry. Furthermore, the future of research should be apply the empirically model of strategic resources to other processes of the SMEs. Moreover, the measurement of the variables relational capabilities, customer response capability and value creation is taken from an analysis of the respondents perceptions indicated in the Likert type questions on the questionnaire. In that respect, it is necessary to use other methodologies, such as the application of qualitative techniques that permit the analysis of the resources based view theory and level of organizational category from a more overall perspective. It is also necessary to develop other constructs and variables that complement the relational capabilities and customer response capability. The 2015 International Conference of Management Sciences (ICoMS 2015), April 23, UMY, Indonesia 9 REFERENCE Abiola, I. 2013. Relational Capital and Business Performance of Female-Owned SMEs.pdf>. 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