Antecedents of innovation capability and firm performance of indonesian ict smes

Abstract

This paper aims to explore the antecedents of innovation capability and firm performance of ICT SMEs within clusters in Indonesia. A causal model was proposed and tested using Partial Least Squares (PLS). The findings reveal that innovation capability is a critical determinant of superior firm performance, while intellectual capital is its major contributor to innovation capability. Surprisingly, being spatially close in a specific location does not lead to the presence of innovation capability. Instead, firm performance is marginally and directly improved by grouping ICT firms nearby and promoting learning capability. In practice, placing firms together in a specific location does not create innovation capability unless it is in collaboration with the governments to improve current infrastructure and eliminate inefficient policies.