The Effect of Innovation on Business Competitiveness of Small and Medium Enterprise in Indonesia

Abstract

This study examines the effect of innovation on the competitiveness of the handicraft sector creative industries in Indonesia. The number of samples was taken as many as 205 SMEs spread in West Java in a proportional random manner. The technique of data collection is done by the questionnaire directly to the respondents. The data analysis technique in this study is a structural equation model (SEM) approach. The use of SEM allows researchers to test the validity and reliability of research instruments, confirming the accuracy of the model while testing the effect of innovation variables on competitiveness variables. The statistical tool used in this study is AMOS version 23. The findings reveal that innovation has a significant positive effect on the competitiveness of SMEs. This study shows that innovation is an important factor that can increase competitiveness. Companies that are able to innovate appropriately will be able to compete with other companies.