THE ALIGNMENT OF INNOVATION STRATEGY, ISLAMIC HRM (IHRM) PRACTICES, AND ORGANIZATIONAL PERFORMANCE: A CONTINGENCY APPROACH

The aims of this study are to test and analyze the level alignment of innovation strategy (incremental and disruptive) with Islamic HRM (IHRM) Practices on Batik MSMEs (micro small medium entreprises) in Pekalongan, especially its environmental, social, and religious performance. Pekalongan is known as Batik creative city worldwide and has a good innovation breakthrough. The sample of this study is most of the owners/managers of Batik MSMEs in Pekalongan by using purposive sampling technique. Samples are divided into two groups using mean split approach, namely MSMEs that choose the incremental innovation strategy and MSMEs that choose disruptive innovation strategy. The statistic technique is using Euclidience Distance Regression. Semantic differential scale is used as variable measurement technique. The result tested by using bivariate model fit approach shows that there is an alignment/fit between incremental innovation strategy with conservative IHRM Practices and Organizational Performance, and on the other hand there is an alignment between disruptive innovation strategy with innovative IHRM Practices and Organizational Performance. This study provides a theory implication related to the importance of having a level of alignment of innovation strategy with IHRM Practices and Organizational Innovation. The managerial implication is MSMEs should have a strategy and innovation policy aligned to the implementation of IHRM Practices in company operation so that the organizational performance can be increased.