ANALYSIS OF PRODUCT AND PROCESS INNOVATION IN IMPROVING COMPANY PERFORMANCE (CASE STUDY ON LEATHER CRAFT INDUSTRY IN GARUT)

Abstract

This research analyses how product innovation and process innovation affect the rate of performance of small and medium enterprises (SMEs) in Garut, West Java, Indonesia, leather craft industry. The study used a survey method to collect data from 62 SMEs using structured questionnaires measured on a Likert scale, and analysed using Minitab 21. According to descriptive results, the mean of process innovation (mean = 30.87) and product innovation (mean = 32.55) has a moderate level of performance. The SME performance stands at relatively low to medium (mean = 7.35). Multiregression analysis shows that product innovation (b = 0.104; p = 0.011) and process innovation (b = 0.145; p < 0.001) have both a positive and significant impact on the performance of SMEs. The model describes the performance variance of 71.94 (Adjusted R2 = 0.719). The results support the claim that enhancing innovation efforts, especially process innovation, is essential in enhancing profitability, absorption of labour, and business continuity amongst SMEs dealing with leather craft.