The Importance of Absorption Capacity and Innovation in Improving Company Performance

Abstract

The purpose of this research is to analyze the importance of absorption capacity and innovation in improving company performance. The research method used in this study is a quantitative method with a descriptive analysis approach. The research population is all manufacturing companies which are included in the theoretical domain and listed on the Indonesia Stock Exchange. In this study, ten manufacturing companies listed on the Indonesia Stock Exchange were selected. For the company's performance variable, the Return on Assets (ROA) indicator is used. The type of data used in this study is secondary data. The analysis technique in this study is the outer model (convergent validity, discriminant validity and composite reliability). Based on the data and research results, it can be concluded that: 1) Absorption Capacity has an effect on Company Performance with a positive and significant influence on company performance which is indicated by the original sample estimate value of 0.922 and the T-statistic value of 11.777 which is greater than the t-value. table (1.96); and 2) Company innovation has no effect on Company Performance with the original sample estimate value of -0.23 and the T-statistic value of 0.297 which is smaller than the t-table value (1.96).