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DOI: https://doi.org/10.33258/birci.v5i4.7076
The Role of Strategy Flexibility, Competitive Intelligence, Organizational Innovation, and Entrepreneurship Leadership in Increasing Agility of MSME Troso Woven Fabric
Ahmad Fika Syauqiy1, I Made Bayu Dirgantara2
1,2Faculty of Economics and Business, Universitas Diponegoro, Indonesia ahmadfikasyauqiy@gmail.com, imadebdirgantara@lecturer.undip.ac.id
I. Introduction
MSMEs (Micro, Small, and Medium Enterprises) have a very important and strategic position, potential, and role in the context of realizing national development goals, especially in Indonesia. Based on the contribution it has, the Indonesian government continues to provide encouragement and support to MSME actors, including the Troso woven fabric industry which can absorb 5412 workers and catapulted the name of Jepara Regency (Central Bureau of Statistics, 2017).
Until the end of 2016, the number of SMEs in Troso weaving continued to increase, reaching 756 units. However, then this number decreased fluctuating until the peak occurred during the COVID 19 pandemic, and as many as 306 business units were unable to survive and adapt to changes in the business environment in the Troso weaving industry (Akpan et al., 2020; Papadopoulos et al., 2020). The outbreak of this virus has an impact of a nation and Globally (Ningrum et al, 2020). The presence of Covid-19 as a pandemic certainly has an economic, social and psychological impact on society (Saleh and Mujahiddin, 2020). Covid 19 pandemic caused all efforts not to be as maximal as expected (Sihombing and Nasib, 2020).
To create an adaptive and highly competitive business organization, organizational agility becomes an absolute competency possessed by the company, which arises because of the support from other factors (Attar & Abdul-Kareem, 2020; Atkinson, et al., 2020;
Akkaya & Tabak, 2020). Several studies have been conducted to obtain these factors, Al- Omoush et al. (2020) found that the agility of manufacturing companies in Jordan is influenced by e-business proactiveness. In addition, a literature review study, (by Attar &
Abstract
This research aims to identify factors that can increase the organizational agility of MSMEs (micro, small, and medium enterprises), especially in the Troso woven fabric industry in Jepara Regency, Central Java, Indonesia. We examine several variables that have been shown to affect large-scale business agility in various industries. So, this research reveals the consistency of some of these factors in increasing the agility of a business organization, large or small. Data were collected from 14 2 active business actors in the Troso woven fabric SMEs as our sample for testing the proposed research model, using a questionnaire which is then processed and analyzed using regression analysis. As a result, we find that the proposed 4 independent variables, strategic flexibility, competitive intelligence, organizational innovation, and entrepreneurial leadership, all affect increasing MSME agility.
Keywords
strategic flexibility; competitive intelligence; organizational innovation; entrepreneurial leadership; organizational agility
Budapest International Research and Critics Institute-Journal (BIRCI-Journal) Volume 5, No 4, November 2022, Page: 29247-29254 e-ISSN: 2615-3076 (Online), p-ISSN: 2615-1715 (Print)
www.bircu-journal.com/index.php/birci email: birci.journal@gmail.com
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Abdul-Kareem, 2020), proves that agile/agile leadership has a significant effect on organizational agility. And other studies mention social networking technology (Ahmadi &
Ershadi, 2021), organizational culture value (Felipe et al., 2017), IT competence &
innovation capacity (Ravichandran, 2018), and strategic flexibility & organizational innovation (Atkinson, et al., 2020). Based on the object of research, some of the studies mentioned above select large-scale companies to study their organizational agility.
Although both large companies and micro, small and medium-scale companies have the same goal, which is to survive and create a sustainable business. (Akpan et al., 2020) . But on the other hand, the two companies with different scales have their characteristics, ranging from the amount of capital owned, income, operating profit, and the number of workers who assist business operations. In addition, the equipment used by the two types of businesses is also different, large businesses optimize machine power in their operations, while MSMEs rely on human labor, as implemented by Troso woven fabric business units (Sakti & Roisah, 2019). This difference then needs to be adjusted by managers and or business owners when they want to improve the agility of their business organizations. So that the adaptation efforts made by a business can be realized.
This study proposes several variables, which are assumed to be factors that increase organizational agility, especially in small and micro businesses. Some of these variables are organizational flexibility, competitive intelligence, organizational innovation, and entrepreneurial leadership. Strategic flexibility is the strength of a business in dealing with changes in its business environment (Ketokivi, 2006). Competitive intelligence is integrated into the organizational culture formed by managers or business owners so that the business runs with one vision and mission (Rouach & Santi, 2001). In addition, organizational innovation refers to the company's ability to create innovative things through products and or services offered to consumers (Saunila & Ukko, 2012). And the last is entrepreneurial leadership which assesses the leadership style applied by managers or business owners to realize the company's vision and mission (Kuratko, 2007).
This study aims to determine whether strategic flexibility, competitive intelligence, organizational innovation, and entrepreneurial leadership affect the organizational agility of Troso weaving SMEs.
II. Review of Literature
2.1 The Effect of Strategic Flexibility on Organizational Agility
Strategy flexibility is proven to have a positive impact on the successful implementation of cost leadership and differentiation strategies that can result in increased business performance (Mejtoft, 2014). Different forms of strategic flexibility in a dynamic environment become a variable that is difficult for competitors to imitate, meaning that flexibility can be used as a source of competitive advantage (Kashani Nik, 2012; Brozovic, 2018).
Bernardes and Hanna (2009) argue that flexibility has a special correlation with the agility of an organization, the two are considered to overlap. But in essence, these two variables have a different focus, strategic flexibility which is more focused on the operational level, and organizational agility which is more at the abstract or strategic level of a business (Badakhshan et al., 2020). Therefore, we propose that strategic flexibility is a variable that influences organizational agility.
H1: Strategy Flexibility Affects Organizational Agility
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2.2 The Effect of Competitive Intelligence on Organizational Agility
The dynamics in the business world have resulted in the competitive environment becoming increasingly complex and unpredictable (Varadarajan, 2020). This becomes a big problem for companies that are not able to adapt to the situation. On the other hand, for companies with good adaptability, the challenge to compete becomes a profitable opportunity. Such an adaptation process is the fruit of the quality of competitive intelligence which includes the provision of accurate, objective, and timely information, so that management can make the right decisions, namely about the steps the company will take in the context of adaptation (Park et al., 2017).
Accessibility of information, data-driven decision-making, and information sharing across the company are key factors to provide initial insights that can be converted into a business opportunity (Chen & Siau, 2011). Furthermore, it was emphasized that one of the things that distinguish an agile organization from other organizations is its ability to utilize cumulative data to make the right decisions (Badakhshan et al., 2020). Therefore, this study proposes competitive intelligence as a factor influencing organizational agility.
H2: Competitive Intelligence Affects Organizational Agility
2.3 The Effect of Organizational Innovation on Organizational Agility
Innovative companies tend to be more accepting of risk, uncertainty, and the existence of new technologies. With the quality of innovation they have, companies can engage in learning and experimentation which in turn become capital in overcoming high uncertainty and are more prone to take risks (Hurley & Hult, 1998). In addition, companies with higher innovation capacity may be more open to new ideas, so they can read market opportunities and bring new products to market faster than their competitors (Jalilvand, 2017).
The ability to deal with various changes in the business environment is also the fruit of innovation, which in turn can create a competitive advantage for the company (Oh et al., 2006). This adaptation process is an illustration of organizational agility which is the company's need in facing intense market competition. And this study assumes organizational innovation as a factor that can increase organizational agility.
H3: Organizational Innovation Affects Organizational Agility
2.4 The Effect of Entrepreneurial Leadership on Organizational Agility
A business must have sufficient organizational agility to survive in unpredictable environmental changes and intense competition. To build such agility, strategic and innovative thinking and the ability to exploit the change sustainably, are essential (Harraf et al., 2015). The role of leadership is vital in formulating policies and strategies used by organizations (North & Varvakis, 2016). Through the right leadership, the ideas and actions of leaders can influence and direct the behavior of organizational members toward achieving the desired goals (Hamidifar, 2015). Several studies have highlighted the importance of leadership in building agile organizations. The results of previous studies showed the positive influence of leadership style on organizational agility (Karimi et al., 2016; Raeisi & Amirnejad, 2017).
To build agility, organizations need leaders who are not only there to lead but also become contributors or facilitators (Mast, 2018). Therefore, entrepreneurial leadership is assumed to be the right leadership style to achieve an organization that can create organizational agility.
H4: Entrepreneurial leadership affects organizational agility
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III. Research Method
In this study, the variables used are independent and dependent variables. The independent variables used are strategic flexibility (X1), competitive intelligence (X2), organizational innovation (X3), and entrepreneurial leadership (X4). And the dependent variable used in this study is organizational agility (Y).
Table 1.
Variable Definition Variable parameters
Strategic Flexibility
(X1)
The ability of a business unit to grow and survive in a competitive environment where change is continuous and unpredictable and requires rapid response to volatile markets.
(Atkinson et al., 2020)
1. Easy to change plans, 2. Make appropriate
modifications,
3. Controlling strategy change, 4. Have practical knowledge
to make changes,
5. Proactive in developing new projects.
(Miroshnychenko et al., 2021 ) Competitive
Intelligence (X2)
The process of collecting, analyzing, and using information about competitors or clients to enhance competitive advantage.
(David, 2015)
1. Market Intelligence 2. Tech intelligence
3. Social strategy intelligence 4. Competitor Intelligence (Hulsman et al., 2006) Organizational
Innovation (X3)
The process by which knowledge is acquired, shared, and integrated to create new knowledge about products and services (Abbas et al., 2020)
1. database usage,
2. Use of quality management systems,
3. Implementation of inter- functional working groups, 4. flexible work responsibilities, 5. Collaborating with
customers,
6. Integrate with suppliers (OECD, 2005)
Entrepreneurial Leadership
(X4)
The leader's ability to build, implement the vision and maintain flexibility, think strategically, and work with others to make changes to create a better future for the company (Kuratko, 2007)
1. proactive, 2. have innovation, 3. able to take risks
4. able to make the right decisions
5. have toughness.
( Khalid et al., 2020 ) Organizational
Agility (Y1)
Transitions predict the future by detecting opportunities or problems before they occur and having the ability and resources to change before they become obvious to competitors (Nissen
& Rennenkampff, 2017)
1. Responsive to customers 2. Readiness to face change 3. Appreciate skills and human
resources
4. Building virtual contributions (Atkinson et al., 2020)
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The population used in this study were the SMEs of Troso woven fabrics. Samples were taken using the non-probability sampling method. The reason the researcher uses this method is that each member of the population does not have the same chance of being selected or taken. The sample in this study is only the workers in the Troso woven fabric SMEs who still survive and operate as of 2022.
In this study, the data collection method was carried out by distributing questionnaires or questionnaires. The data analysis method used is the multiple regression analysis methods with the Statistical Package for Social Science (SPSS) version 24.0 program.
IV. Result and Discussion
In this study, the process of distributing questionnaires was addressed to 142 respondents, namely workers in the Troso weaving SMEs who still survive and operate as of 2022. And the results of the regression calculations from this study are as follows:
Table 2.
Coefficients a
Model Unstandardized
Coefficients
Standardized Coefficients
T Sig.
B Std. Error Beta
1 (Constant) 4.610 1.435 3.213 .002
Strategy Flexibility .167 .068 .207 2.456 .015
Competitive Intelligence .191 .077 .211 2,472 .015 Organizational Innovation .134 .051 .202 2,613 .010 Entrepreneurial Leadership -124 .059 .184 2,087 .039 a. Dependent Variable: Organizational Agility
Standardized regression equations are:
Y = 0.207 X1 + 0.211 X2 + 0.202 X3 + 0.184 X4
Based on the description of the regression equation above, it is known that the organizational agility of MSMEs is influenced by the strategic flexibility variable with a regression coefficient value of 0.207, the competitive intelligence variable with a regression coefficient value of 0.211, the organizational innovation variable with a regression coefficient value of 0.202 and the entrepreneurial leadership variable with a coefficient value. regression of 0.184.
4.1 Coefficient of Determination (R 2)
Determination (R2) is used to assess the extent to which the model's ability to explain variations in the dependent variable. The value of the coefficient of determination is between 0 and 1. The value of R2 which is close to 1 indicates that the independent variables provide almost all the information needed in predicting the dependent variable (Ghozali, 2013).
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Model Summary Mode
l
R R Square Adjusted R Square
Std. The error in the Estimate
1 .629 a .396 .378 1,230
a. Predictors: (Constant), Entrepreneurial Leadership, Organizational Innovation, Strategy Flexibility, Competitive Intelligence
Based on the table above, the value of the coefficient of determination (Adjusted R Square) in this study is 0.378 which means that 37.8% of the four independent variables, namely strategic flexibility, competitive intelligence, organizational innovation, and entrepreneurial leadership can explain variations in organizational agility variables, while the rest is explained by other variables outside the study.
4.2 T test
The t-test shows the extent of the influence of one independent variable individually on the dependent variable, using a significance level of = 5% or 0.05 (Ghozali, 2013).
Based on the regression table above, the strategy flexibility variable has a significant value of 0.015. So, it shows that these variable influences organizational agility because the significance value is <0.05. The same thing is also shown by the variables of competitive intelligence, organizational innovation, and entrepreneurial leadership, each of which has a significant value of 0.015, 0.010, and 0.39. That is, the four independent variables studied in this study affect organizational agility so that H0 is rejected and H1, H2, H3, and H4 are accepted.
V. Conclusion
The results show that strategic flexibility, competitive intelligence, organizational innovation, and entrepreneurial leadership have a positive and significant effect on organizational agility. Strategy flexibility is a strength for Troso weaving SMEs in facing changes in their business environment. Competitive intelligence becomes capital for business managers to make decisions to win the competition with their competitors. In addition, organizational innovation plays a role in creating innovative things through products and or services offered to consumers who are interested in Troso woven fabrics.
And entrepreneurial leadership as one of the leadership models contributes to increasing organizational agility through the approach taken by leaders in the Troso weaving MSME environment in organizing workers and their businesses.
As a suggestion, the author provides input so that the Troso weaving MSME entrepreneurs can continue to improve and adapt to various changes in this business environment, including through the implementation of flexible strategies, and taking anticipatory and solution steps based on market information, consumers, and competitors.
In addition, Troso weaving entrepreneurs must innovate according to market conditions and apply the right leadership model in managing human resources and business, one of which is the entrepreneurial leadership model.
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