INNOVATION CAPABILITY, ABSORPTIVE CAPACITY AND SUPPLY CHAIN INTEGRATION IN SMES PERFORMANCE: CASE STUDY OF CREATIVE INDUSTRY IN YOGYAKARTA, INDONESIA

The key to the success of the company in this dynamic era is innovation capability and absorptive capacity. There is a paucity of research that links these two things with supply chain integration, especially for SMEs. This study aims to analyze the relationship between innovation capability, absorptive capacity and supply chain integration in improving the performance of SMEs in the creative industry of Yogyakarta Indonesia. The empirical test, which used a sample of 143 managers of the creative industry SMEs in Yogyakarta supports most of the hypotheses in the study. The study conducted structural equation modeling to test the proposed relationship. The results demonstrate that innovation capability and absorptive capacity have a significant influence on the performance of SMEs both directly and through increasing supply chain integration as a moderating variable. The results of this study are expected to be able to contribute to SME managers both owners and the government in improving the performance of creative industry SMEs in Yogyakarta.