Country size and the per capita benefit of access to the other country’s network tend to offset each other in determining the division of the gains from liberalization, suggesting that the country gains from cross- border network service liberalization can be of similar (absolute) size. This is opposite to the case of trade in goods where the benefits of liberalization accrue disproportionately to the smaller country (in the limiting case, a small open price taking economy receives all the gains from its own trade liberalization).
Further study by Sumeet et al,, seeing the evidence of North American Free Trade Area (NAFTA), Asean Free Trade Area (AFTA) which is developed by the members to create a free flow of goods, services, investment, and a free capital flow, equality economic growth and poverty alleviation (Lloyd et al, 2004 in Suumet et al, 2011), identified barriers be significant in smoothing the goods’ flow especially from one country to others.
In the context of SMEs category in Java Indonesia, in terms of efficiency, study of distribution channel innovations as addressed earlier, showed when the innovations in distribution channels were conducted collectively or together as seen in the result(table 3), the innovations are not supposed to be implemented fully as only certain innovations were significant with distribution efficiency performance that lead to firm performance.
At this stage of analysis, a series of multiple regression (Beardon and Teel, 1982) is conducted to derive the various path coefficients. The regressions are carried out as the following equations :
X15 = p15 1X1 + p15 2X2 + p15 3X3 + p15 4X4 + p15 5X5 +p15 6X6 + p15 7X7+p15 8X8+p15 9X9+p15 10X10+p15 11X11+p15 12X12+p15 13X13+p15 14X14+ e15 X14 = p14 7X7 + p14 8X8 + p14 9X9 +p14 10X10 + p14 11X11+p14 12X12+p14 13X13+ e14 X14 = p14 6X6 +e14 X14 = p14 5X5 +e14 X1 = e1
X1= firm size, X2= age of company, X3=sector, X4=environment hostility, X5= Innovation in assortment, X6= Innovation in order handling, X7=Innovation in information sharing, X8=Innovation in product and distribution scheduling, X9=Innovation in inventory, X10=Innovation in transportation coordination, X11=Innovation in packaging, X12=Innovation in warehousing, X13=Innovation in acquisition, X14=Distribution efficiency, X15=Firm performance economic indicator. Aggravated by the diverse findings of the previous studies on distribution channel innovation and firm performance, based on 120 export-oriented SME samples in Indonesia, this study confirms the concept that distribution channel efficiency mediated the relationship between distribution channel innovation and the SMEs performance. It can be concluded by doing innovation in distribution channel activities particularly in information sharing and transportation coordination can enhance the efficiency which improve SME’s performance as they mediate the relationship. While other innovations such as assortment innovation & warehousing innovation also lead to firm performance. More importantly as the government assistance has limitation to support the SMEs, SMEs themselves suggested innovating their distribution channels.
Table 2 demonstrated basic information on each variable or factor and correlations among them. Positive correlations happen almost among all distribution channel innovations and distribution efficiency leading to firm performance. Most of all the significances are consistent with the literature. The positive highest correlation occurs between information sharing & efficiency while the lowest one between order handling innovation and efficiency. Interaction among the variables was mostly positive.
While the relationship between distribution channel innovation and distribution channel efficiency is shown by the regression results in table 3, innovations in assortment (в = 0.093, p < 0.01), was found to be significantly related to distribution channel efficiency. Hence, H1 was supported. The next relationship between distribution channel innovations and distribution efficiency is shown by the multiple regression results in table 4. In this table, indicated innovations in information sharing (в = 0.064), p < 0.01), and transportation coordination (в = 0.047, p < 0.05) & innovation in warehousing (в = 0.069), p < 0.01 ) were found to be significantly related to distribution channel efficiency while the others were found not significant. Hence, the hypotheses testing can be concluded that H3, H6, & H7 were supported while H2,H4,H5, H6, H8, & H9 were not supported.
Sample and data
Following the Ministry of Cooperatives and Small and Medium Enterprises and the Republic of Indonesia and Central Statistical Agency (BPS), this study measured SME as a business unit hiring less than 100 workers. Similar with other researchers-M.Mohd Rosli et al,, Akira et al,, Lee et al,, Eitan et al,, Roper et al,, & others, a self-administered questionnaires were used, data from 120 samples of SMEs export oriented were gathered by survey -DIY & Java surroundings-Indonesia was selected for the research population, a pilot survey had been conducted first -to validate and test the constructs and items used in the questionnaire, face-to-face interviews were conducted, a “drop and collect” procedure was chosen- for the actual survey to ensure a high response rate for the study, the questionnaire was cross-checked first-to ensure all the questions had been answered, export-oriented wood, clothing and food-based industries SMEs were prioritized for their characteristic, & owners/top managers were asked -to fill up the questionnaire for they had the best knowledge for management and operation of their firm- particularly regarding distribution channel and firm performance.
Acknowledging probable shock of size of the firm, age of company, industry and competitive environment hostility on firm performance as found in other studies, were integrated as control variables in this study. Firm size does have impact on firm performance, but the degree and trend of its impact is diverse. While other studies; other studies found differently (Moreno & Casillas, 2007; Shanmugan & Bhaduri, 2002).
Impact of firm age on firm performance is diverse too. Kristiansen, Furuholt & Wahid found that the length of time in operation was significantly associated with business success. Similar positive impact of firm age can also be found in Shanmugam & Bhaduri and Birley & Westhead due to vast social capital owned by older firms. In contrast, other studies (Nichter & Goldmark, 2009) found that new firms grew faster than the older ones.
Significant influence of different types of industry on firm performance can be found in Gadenne and Humphreys & McClung, among others due to different marketing strategies and management practices (Gadenne, 1999). Pertinent to competitive environment hostility and firm performance, a study by Miller & Friesen is interesting.
Firms in general, see packaging as a tool for product promotion & use. While the engineers, in general, see packaging as a protective device only. Interestingly, distribution management see packaging much more broadly. They see any change in design, size, media of transportation and so forth would contribute to the distribution efficiency. A recent study by Young in Lacroix on 800 American shoppers demonstrated that innovation in new packaging systems directly effected price expectation and product selection among the shoppers. He or she found if packaging can be modified properly, it is very likely to contribute a positive return on investment (ROI) by increased market share. It is also likely to raise prices. At then, the additional profit could be used to cover incremental costs. Morgado, suggested that plastic material based have advantages as they can provide less material, & also permit recycling. Using plastic materials, coloring activity, decorating activity, & printing activity can allow the innovated packaging to receive not only all the necessary information for the customers, but also other essential aspects including customer recognition H8 : Innovation in packaging will be positively associated with distribution performance in terms of efficiency.
Product and distribution scheduling is known as logistic activity relating to when & where, the goods to be produced & delivered. Therefore, Ballaou believes the activity could optimize income and source usage. Varimna found an integrated scheduling method involving material, inventory, production, & delivery activity found can improve efficiency. Other method using computer programming in the coordination for instance what it is called monolithic & hierarchical approach for coordination of the supply chain product flow indicating similar outcome that both approach be capable of finding good coordinated schedules for large size problems in a logical computation time that lead to efficiency. While related with integrated system, the study of using integrated scheduling system also be able to obtained operational performance in terms of efficiency in network. H4: Innovation in product & distribution scheduling system sharing will be positively associated with distribution performance in terms of efficiency.
Lee asserted by implementing innovation in distribution channel, the coordination capabilities among channel activities can be enhanced. Lee also confirmed by the innovations, the malfunction of negative consequences could be omitted. By innovations, higher inventory and transportation costs could be reduced. By innovations, longer delivery times will be fastened. And other malfunctions can be omitted by innovations as well. Nada assured further that, using technology, as part of innovation, will enable firm to promote organisational coordination improvement. At last, better performance achieved.
Says assortment is “a collection of two or more types of goods, which either complement each other directly or in total possess some degree of potency for future contingencies”. It was inferred that giving advantage for typical market is the aim of assortment. Diehl & Poynor found customers tend to be less fulfilled when choosing options from larger to smaller assortments. Salvador, worded using product configuration technology to customise product into diverse assortments as customers’ preference will productively enhance sales for the efficient way of serving products to the customers. As optimal assortment activities relied on the right demand characteristic for each product, forecasting demand activities for new products in assortment can bring decision making then lead to the efficiency. It has indication that doing innovation in assortment would improve efficiency, hence, the first hypotheses emerge H1 : Innovation in assortment will be positively associated with distribution performance in terms of efficiency.
When The Thailand decided adopting floating on its currency in mid-1997, financial crisis in ASEAN unavoidably done- the Asian financial crisis. It made the exchange rate of domestic ASEAN countries and some others – Indonesia, Malaysia and the Philippines harshly depressed. The economic slump happened for most all of them let their currency semi freely depend on the U.S dollar and at the same time received a substantial amount of short-term foreign capital. In Indonesia, the crisis made the Rupiah currency depreciated dramatically from around 2,500 to 10,000 Rupiah per U.S. dollar, whilst its GDP declined by 13% in 1998. Stunningly, large enterprises (LE), and SMEs responded differently to it. Somehow, SMEs survival under the crisis much better than larger ones. As the local market demand was low, the SMEs switched their market to the global. On the contrary, LEs were still under performed for their high import substances in their products.
Since then, the existences and establishments of SMEs has attracted the interest of the globe. As SMEs in Indonesia are mostly concentrated in agro-based industries, their capability to generate employment and value added are highly seen. Illustrated in figure 1-next page, they generated value added as much as 2,993,151 billion Rupiahs or 56.5% of value added in total. By their establishment, in 2009, the number of SMEs totaled 52.7 million or 99.9% of all firms’ establishments. In terms of job creation, Indonesian SMEs provided about 96.2 million employment or 97.3 % of the total employment.