Does Institutional Intervention play a Role in Small Business Clustering? An Empirical Evidence from Semarang, Indonesia

Abstract

This study examines the effect of relational capability on competitive advantage to support innovation and value cocreation capacity. Five hypotheses were tested by structural equation modeling. The population of this study included 332 small and medium-sized enterprises (SMEs) entrepreneurs united in the Forum for Economic Development and Employment Promotion in Semarang categorized into a milkfish cluster, batik cluster, food processing cluster, and handicrafts cluster. A total of 188 SMEs were selected as the sample through random sampling stratification. The data was tested using AMOS software version 22. The results show that relational capability has a significant effect on innovation capability, value co-creation capacity, and competitive advantage. Furthermore, value co-creation capacity and innovation capability have a positive effect on competitive advantage. In this regard, relational capability and value co-creation capacity allow SMEs to increase their ability to adapt to environmental changes and to create new capability. The conclusion of this study is that SMEs must have capabilities to develop potential, expanding and enriching business networks and make-business development strategies in order to achieve sustained competitive advantage.