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

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.
Nevertheless, the result of the study limitedly focused in internal aspects how innovation in distribution channels effect distribution performance of SMEs export oriented. This appeared to be the weakness of the study as external aspects obviously explain distribution performance in turn effect firm performance. However, as study conducted by M.Mohd Rosli et al, on SMEs found global orientation is significantly associated with firm performance, Akira, et all, found that the involves of institutions are significant with innovation in Indonesian SMEs that lead to their firm performance. Furthermore, Xiaobo et al, found infrastructure was significant factors to enhance firm performance whilst relating with IT infrastructure, study of Ronald et al, found IT infrastructure lead to firm performance.