INNOVATION IN DISTRIBUTION CHANNEL(S) & COST EFFICIENCY ON SMALL & MEDIUM ENTERPRISE SCALES’ PERFORMANCE: METHODOLOGY

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.

Measures SME performance
Concomitant to Kongmanila & Takahashib, and Murphy, Trailer & Hill, the constructs of firm performance in this study built-in export sales volume, export intensity, and firm profitability. The respondents were asked to designate the level of their present business performance in the three variables compared to their closest competitors in the same industry using a 7-point scale, ranging from “1 = the lowest” to “7 = the highest”.
Innovation in distribution channels
In addition to research and development (R&D) activities, innovation in distribution channels in this study comprised the application of new technologies or modification of existing methods as defined by Kongmanilaa & Takahashib in each function of the distribution channel (assortment, order handling, information sharing, inventory, warehousing, packaging, and transportation coordination). Items for each distribution channel were derived from Bowersox, Closs & Helferich and Ballou. Number of items for each variable of the distribution channel innovation and its reliability test (Cronbach’s alpha) is shown in Table 1. Distribution channel efficiency-COST
Modified & adopted from Ulaga & Borgstrom, the three items used to measure the variable were: operation cost, labour cost, and tariff cost. Using the 7-point scale from “1= the least efficient” to “7= the most efficient”, the respondents were requested to compare their performance in distribution channel as compared to their closest competitor in the same industry.
Control variables
Firm size and age were measured by total number of workers and year of operation of each enterprise respectively. Industry was measured by nominal scale; whilst competitive environment hospitality was measured in the 7-point scale, ranging from “1= the least hostile” to “7= the most hostile”. The four items regarding demographic change, rate of obsolescence in product technology, market change, governmental regulatory change and market conditions were adopted from Miller & Friesen.
Table 1 show Cronbach’s alpha for all the variables, which fell within the acceptable range of more than 0.7, which indicates the reliability of the scales.

Table 1: Variables, items and the reliability test

Constructs Items Cronbach’s alpha
Innovation in assortment 5 0.908
Innovation in order handling 5 0.968
Innovation in product and distribution scheduling 5 0.979
Innovation in information sharing 5 0.971
Innovation in inventory 5 0.933
Innovation in packaging 5 0.927
Innovation in transportation coordination 5 0.948
Innovation in warehousing and product handling 5 0.883
Innovation in acquisition 6 0.921
Distribution efficiency-cost 3 0.858
Competitive environment hostility 4 0.840
Firm performance (economic indicator) 3 0.841

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