Editorial Team

Editor-in-Chief

1. Ketut Sudarma, Department of Management, Faculty of Economics, Universitas NegeriSemarang, Indonesia

Editorial Advisory Regional Australia

1. You-il Lee, [SCOPUS ID: 16052651600] University of South Australia, Centre for AsianBusiness, Adelaide, Australia

Editorial Advisory Regional South Asia

1. K. Prathap Reddy, [SCOPUS ID: 56346279400] Osmania University, Department ofZoology, Hyderabad, India

Editorial Advisory Regional West Asia

1. Peter B. Oyelere, [SCOPUS ID: 8309407900] United Arab Emirates University,Department of Accounting, Al Ain, United Arab Emirates

Associate Editor

1. Nury Ariani Wulansari, [SCOPUS ID 57188958572] Department of Management,Faculty of Economics, Universitas Negeri Semarang, Indonesia

Editorial Board

1. Rini Setyo Widiastuti, [SCOPUS ID: 57188965809] Department of Management, Facultyof Economics, Universitas Negeri Semarang, Indonesia

2. Desti Ranihusna, [SCOPUS ID: 57188965653] Department of Management, Faculty ofEconomics, Universitas Negeri Semarang, Indonesia

3. Arief Yulianto, Department of Management, Faculty of Economics, Universitas NegeriSemarang, Indonesia

4. Hasan bin Saleh, [SCOPUS ID: 57192089000] Faculty of Technology Management andTechnopreneurship, Universitas Teknikal Malaysia Melaka, Malaysia

5. Irwan Trinugroho, [SCOPUS ID: 56178586300] Department of Management, SebelasMaret University, Indonesia

6. Norliza Binti Che Yahya, [SCOPUS ID: 56338896000] Center for Economis and FinanceStudies (Cf EFS), Universiti Teknologi MARA, Malaysia

7. Ayu Ekasari, Department of Management, Trisakti University, Indonesia8. Heri Yanto, [SCOPUS ID: 57191187793] Department of Accounting, Universitas Negeri

Sermarang, Indonesia9. Naili Farida, Faculty of Social Science and Political Science, Diponegoro University,

Indonesia, Indonesia

10. Harjum Muharram, [SCOPUS ID: 56027948000] Department of Management,Diponegoro University, Indonesia

11. Alimudin Rizal R, Department of Management, Stikubank University, Indonesia12. Euis Soliha, Department of Management, Stikubank University, Indonesia13. Heru Sulistyo, Department of Management, Sultan Agung Islamic University, Indonesia14. Mutammimah ., Department of Management, Sultan Agung Islamic University,

Indonesia

Vol 7, No 2 (2016)

September 2016 (DOAJ Indexed)

DOI: http://dx.doi.org/10.15294/jdm.v7i2

Available online since 10th September 2016.

Table of Contents

Articles

THE ROLE OF INNOVATION IN MEDIATING MARKET ORIENTATION TOCOMPANY PERFORMANCEPutu Intan Paradictha Pradnya Putri, Ni Nyoman Kerti Yasa, I Ketut Rahyuda

PDF

CASH HOLDING, GOOD CORPORATE GOVERNANCE AND FIRM VALUEPrana Wahyu Nisasmara, Musdholifah Musdholifah

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ANALYSIS OF IPO UNDERPRICING FLUCTUATION: EMPIRICAL STUDY ININDONESIA STOCK EXCHANGEManduh M. Hanafi

PDF

REVENUE DIVERSIFICATION, PERFORMANCE, AND BANK RISK: EVIDENCEFROM INDONESIAMutiara Nur Hafidiyah, Irwan Trinugroho

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EXPLORING SERVICE QUALITY IMPACTS ON CUSTOMER SATISFACTION INMILITARY MEDICAL CENTRES: MODERATING ROLE OF PERCEIVED VALUEAzman Ismail, Mohd Helmi Ali, Nur Ilyani Ranlan Rose, Anis Anisah Abdulla, HerwinaRosnan

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THE IMPACT OF ENTREPRENEURIAL ORIENTATION AND COLLABORATIVENETWORKS ON CREATIVE INDUSTRIES PERFORMANCEMulyana Mulyana, Sutapa Sutapa

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THE IMPACT OF EXPERIENTIAL MARKETING ON WORD OF MOUTH WITHCUSTOMER SATISFACTION AS A INTERVENING VARIABLEMuhammad Muhammad, Yessy Artanti

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The Effort to Create Customer Engagement on Customer E_Banking (Empirical Studies onBank BNI Regional Semarang)Alimuddin Rizal Rivai, Wahyudi Wahyudi

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COMPETITIVENESS, MARKETING ACCESS, AND NETWORK CAPABILITY ANDITS IMPACTS ON MARKETING PERFORMANCETeguh Iman Sayekti, Euis Soliha

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Jurnal Dinamika Manajemen, 7 (2) 2016, 105-119

http://jdm.unnes.ac.id

THE ROLE OF INNOVATION IN MEDIATING MARKET ORIENTATION TO COMPANY PERFORMANCE

Putu Intan Paradictha Pradnya Putri, Ni Nyoman Kerti Yasa, I Ketut Rahyuda

Faculty of Economics, Udayana University, Bali, Indonesia

Abstract

The purpose of this study was to determine the effect of market orientation towards innovation, the effect of market orientation on performance, the effect of innovation on the performance and innovation mediating role of market orientation on corporate performance convection in Denpasar. This study took a sample of 123 respondents who market their products in the city of Denpasar. The analysis technique used in this study is the path analysis. Results of market orientation hypothesis testing showed positive and significant impact on innovation, market orientation and significant positive effect on company performance, innovation and signifi-cant positive effect on company performance. Innovation is able to mediate the relationship of market orientation on business performance significantly. Employers convection in Denpasar should develop a culture of orientation on the market so as to boost innovation by adapting new ideas oriented market changes in order to achieve improved performance of the company

Info Article

History Article:Received May 2016Approved June 2016Published September 2016

Keywords:Market Orientation; Innovation; Company Performance

PERAN INOVASI MEMEDIASI ORIENTASI PASAR TERHADAPKINERJA PERUSAHAAN

Abstrak

Tujuan penelitian ini adalah untuk mengetahui pengaruh orientasi pasar terhadap ino-vasi, pengaruh orientasi pasar terhadap kinerja, pengaruh inovasi terhadap kinerja serta peran inovasi memediasi orientasi pasar terhadap kinerja perusahaan konveksi di Kota Denpasar. Penelitian ini mengambil sampel sebanyak 123 responden yang memasarkan produknya di Kota Denpasar. Teknik analisis yang digunakan dalam penelitian ini ada-lah analisis jalur (path analysis). Hasil pengujian hipotesis menunjukan orientasi pasar berpengaruh positif dan signifikan terhadap inovasi, orientasi pasar berpengaruh positif dan signifikan terhadap kinerja perusahaan, inovasi berpengaruh positif dan signifikan terhadap kinerja perusahaan. Inovasi mampu memediasi hubungan orientasi pasar ter-hadap kinerja perusahaan secara signifikan. Pihak pengusaha konveksi di Kota Denpasar sebaiknya mengembangkan budaya orientasi pada pasar sehingga mampu meningkatkan inovasi dengan mengadaptasi ide-ide baru yang berorientasi pada perubahan pasar demi mencapai peningkatan kinerja perusahaan.

JEL Classification: G3, G32

Correspondence Address Jln. P. B. Sudirman Denpasar Bali Indonesia 80232 email: manraikerti@yahoo.co.id

ISSN 2086-0668 (print)

2337-5434 (online)

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INTRODUCTION

In the present era, the company is requi-red to move more dynamically, innovatively, and able to take advantage of all the existing opportunities as the competition in the world of business is increasingly competitive. This app-lies to all types of companies, both large-scale companies as well as small-scale enterprises. Nowadays, the competition is not executed by employers in the country only, but foreign busi-nessmen also take part, considering that AFTA (Asean Free Trade Area) would take effect in the end of 2015. Indonesia is one one of the countries that would take part in this regional economic cooperation and contribute to the existing competition. Indonesia is one of the countries in ASEAN region having the largest population of around 253,609,643 people.

The large population of Indonesia is very potential as an important market for the in-vestors and free trade doers in ASEAN region. AFTA will be the opportunities as well as threats for Indonesian business doers. If the Indonesian business people are not able to fight against the current fierce of competition then of course the Indonesian entrepreneurs will lose in the com-petition. The diversity of products, consumers’ wants as well as growing up number of compe-titors make entrepreneurs should be smart in analyzing the market. Market analysis is useful for entrepreneurs in recognizing all potencies and trends in order to gain market opportunities with the ultimate goal of gaining income or pro-fit. It is merely to look at the market potential, the entrepreneurs also use market orientation as a culture so all the changes in market environ-ment and competition become the main focus of improving company performance.

Some studies suggest that market orien-tation positively affects performance (Jyoti & Sharma (2012); Ahimbisiwe, (2013); Soren-sen and Madsen (2012) and Lin et al. (2008) all believe that market orientation is the key to successful business performance. However, Johnson et al. (2009) in their findings did not find any direct and significant relationship bet-

ween market orientation and company perfor-mance. The same thing in findings of Keskin (2006) illustrated that market orientation has no direct influence on company performance. Pinho (2008) previously have incorporated in-novation as a mediating variable in relationship between market orientation and company per-formance, and the results of research showed that the role of innovation as a mediator has no effect to the relationship between market orien-tation and company performance.

Hartini (2012) stated that innovation carried out by a company did not affect the performance of the company. The same result was also found by Chao & Spillan (2010) sta-ting that market orientation is something less supportive to organizational success because it ignores the creative capabilities of the company. In addition, there are also some researchers sta-ting that innovation carried out by a company has less effect to the performance of the com-pany. This is due to that competitors can repli-cate rapidly innovation carried by the company (Lattuch et al., 2013).

This study attempts to examine the role of innovation in mediating market orientation to garment company performance in Denpasar. Market orientation may affect innovation and a promising way to achieve the company perfor-mance (Chang et al., 2014). The development by launching new products is an effective means to improve the performance and growth of the company (Sorescu et al., 2008). The reason for choosing convention SMEs in Denpasar City is that Denpasar is the center of clothing trend of Bali Province, where both men and women in Denpasar city largely follow the trend of fashion at the moment. The increasing competition in garment SME industries in Denpasar is charac-terized by the mushrooming of local competi-tors and number of foreign brands in the market producing similar products. The impact of high competition, productivity will be automatically fluctuated in the company.

Innovation, of course, must be applied to each company. This is a problem raised in this study in which the growth rate of production

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in garment industries did not move significant-ly, where the growth rate of production should have been able to increase because Denpasar, particularly, has creative and skilled workforce so they are capable to produce quality products. However, most employers have not been able to manage resources optimally to achieve the desired performance of the company. Through steady market orientation and innovation ap-proach, garment SMEs in Denpasar is expected to achieve good performance of company and the company can continue to operate from year to year.

Market orientation is a business cultu-re where the organization has a commitment to continue to be creative to create superior value for customers. Market orientation is the most ef-fective and efficient corporate culture to create the required behaviors for the creation of a good value for customers, and this creates continuous superior performance for their business (Idar & Mahmod, 2011 and Widodo, 2013). Market-oriented organization can identify and develop market ability, by way of feeling change in the target market, seeking for information and ana-lyzing the behavior of potential customers and creating a bond with the customers (Kropp et al., 2006).

Market-oriented organizations are de-manded to be superior in perceiving market de-sire and ability to connect customers and able to respond to changing needs of the market ahead of their competitors (Rong et al., 2014). The ability to perceive the market demand re-fers to the organization’s ability to continue to learn about future market development forecas-ting (Wang, 2013). The ability to perceive the market is the ability of organizations to adapt changes continuously, monitor the opportuni-ties and threats in external markets (Morgan et al .. 2009).

Market orientation is a unifying element of the efforts and projects of individuals and de-partments, leading to higher performance, the greater degree of market orientation of a com-pany, the better the performance will be (Felgu-eiraa & Gouveia, 2012). Market orientation has

three dimensions: customer orientation, com-petitor orientation, and coordination among functionals (Liu et al., 2013).

Customer orientation is the willingness to assist customers in assessing their needs and driving the right decisions, providing services that meet customer needs, and avoiding high-pressure sales tactics or force (Lee et al., 2011). Competitor-oriented companies spend their time on more imporant issues through the mo-tions of competitors and market and try to find a policy that can be applied to products they produce (Taleghani et al., 2013). Coordination amongst functionals is to coordinate all func-tions of the organization and operation of cus-tomers and market information in order to cre-ate value for customers (Taleghani et al., 2013).

Market orientation is used as a referen-ce to perform a various innovations as one of the ways of a company creating core capability (Hoq & Horbani, 2009). In the long term, the ability to compete of most companies depends on the ability of the companies to innovate, to provide supply continuously to customers both new goods and services (Permana, 2013). Thin-king beyond the box is the slogan of many experts connecting creative thinking for company inno-vation (Reckhenrich et al., 2009). Innovation is the ability to create something new or bring rene-wal and act in ways that takes advantage of these new capabilities (Marcati et al., 2008).

Innovation provides strategic-oriented companies to address the problems they face when trying to achieve a sustainable competi-tive advantage (Kuratko et al., 2008). Innova-tion is also seen as a process of creating ideas, developing discoveries and ultimately the intro-duction of new products, processes or services to the market. Atalaya et al. (2013) stated that there are four types of innovation in a company, that is product innovation, process innovation, marketing innovation and organizational inno-vation. Atalaya et al. (2013) described that the introduction of product innovation and deve-lopment of the type of different goods or servi-ces and complete the shortcomings of prior fin-dings and emphasis more on the quality aspect.

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Atalaya et al. (2013) mentions that mar-keting innovation is the implementation of a new marketing method involving a new chan-ge in communication to consumers and taking advantage of new ways of marketing a product, such as, utilizing the Internet media. Atalaya et al. (2013) state that an organizational innova-tion is the implementation of new practices of business organizations to be more effective and efficient in achieving goals and improving com-pany performance.

The company performance is defined as the ratio of the value created by the company in expectation to have mpre values for the compa-ny (Herath & Mahmood, 2013). Measurement of company performance is very useful to com-pare the company performance for the last peri-od and the coming period, so it can be recogni-zed whether the performance has improved or otherwise decreased (Hand, 2011). According Kanyabi & Devi (2012), performance is a measu-rement of a company financial capability, such as, profit level, level of investment in both sales and profit growth. Mandy (2009) and Handaya-ni (2011) viewed the performance as a result of adaptation process of its effective management.

Organizational performance can be me-asured using a number of criteria including ef-fectiveness, efficiency, and growth productivity. The effectiveness of a company can be used to measure the operational, financial and behavio-ral level. First, financial measurement might in-clude profitability and growth. Second, the size of the operational may include contact resour-ces, level of production, marketing, employee attitude to work and so forth. Third, effective behavior consists of adaptability of employees, satisfaction and good interaction which can be used to assess performance.

Kwon (2010) stated that a company per-formance is related to the marketing performan-ce in term of sales growth, customer growth and sales volume as a performance measurement device of a company marketing. Olusola (2011) described the concept of performance as the ability to assess the degree of success of a busi-ness organization both small or large.

The Effect of Market Orientation towards Inno-vation

Ahimbisibwe et al. (2013) stated that market orientation has positive effect to innova-tion in their research on fruit export in Uganda. Bigliardi et al. (2011) revealed in a study of in-novative SME. It was stated that the companies investigating market emphasized more on pro-duct enrichment and had effects on the better system of operational and technology than less innovative companies. Hoq & Horbani (2009) found a positive relationship between market orientation and innovation. Innovation is seen as one of the value creating core capabilities driving the behavior of market orientation. In a high-tech enterprise, market orientation is considered to have a positive influence to mar-ket orientation innovation because it possesses superior market sensing and has the ability con-nect customers, and this ability is considered to affect higher innovation performance (Baker & Sinkula, 2007). Market-oriented strategy is po-sitively related to innovation within a company (Mahmoud et al., 2016).H1: Market Orientation has positive and

significant effect to Innovation

The Effect of Innovation to Company Perfor-mance

Ahimbisiwe (2013) found a positive ef-fect between a company innovation and com-pany performance in fruit export companies in Uganda. Salim & Sulaiman (2011) found a po-sitive effect of innovation to the performance of small and medium enterprises in Malaysia. In-novation is considered to be able to assist com-panies in developing competitive strategies. Johnson et. al. (2009) stated that there is a rela-tionship between innovation and performance of agribusiness company. Innovation may lead to an increase of market share, greater produc-tion, higher productivity growth and increase revenue (Crema et al., 2014). Previously, Hao et al. (2012) have developed a framework for studying relationship between learning orienta-tion, company innovation and company perfor-mance of manufacturing and service industries

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in Austria and China. Their study shows that company innovation has positive effect to com-pany performance.H2: Innovation has positive and significant

effect to Company Performance

The Effect of Market Orientation to Company Performance

The findings of Jyoti and Sharma (2012) in their study revealed a positive effect of market orientation to business performance. Ahimbisi-we et al. (2013) found a positive effect between market orientation and performance in fruit export companies in Uganda. It was noted that innovative companies tended to have better business than companies that were not inno-vative because through innovation, companies respond to changes more quickly in marketing environment.

Lages & Lages (2011) stated that mar-ket orientation positively affects performance of a company due to market-oriented compa-ny is actively involved in the development of new knowledge and always learning, facilitating product innovation effectively to increase sales, market segment, and other aspects of perfor-mance of a company. Lin et al. (2008) examin-ed the effects of market orientation to business performance and found a positive relationship. Sorensen and Madsen (2012) mentioned that a market-oriented company having market infor-mation can predict market needs and changes accurately and quickly, enabling them to res-pond quickly and precisely thus increasing com-petitive advantage and company performance.H3: Market Orientation has positive and signi-

ficant effect to Company performance.

The Role of Innovation in Mediating Between Market Orientation and Company Performance

Johnson et al. (2009) suggested that in-novation is able to mediate the effect of market orientation to performance. Theoharakis & Hooley (2008) stated that the effect of market orientation leading to innovation, is an impor-tant component in marketing, and if connected to a company performance, this innovative

component is clearly a mediating component. Innovation is a mediating variable between market orientation and performance of a com-pany (Olavarrieta & Friedmann, 2008). Likewi-se, the finding stating that innovation is a me-diating variable between market orientation to a company operational performance (Carbonell & Escudero, 2010).H4: Innovation is able to mediate Market

Orientation to Company performance significantly.

Based on hypothesis, the research model can be showed in Figure 1

Figure 1. Reseach Model

METHOD

The method of this research is associative applying one (1) independent variable, 1 (one) dependent variable and one (1) intervening variable. This research aims at determining the role of innovation in mediating market orienta-tion to company performance, a case study of garment companies in Denpasar. The number of samples taken were 123 (one hundred and twenty three) persons. Th sampling technique applied in this research is purposive sampling. Sugiyono (2014: 122) described that a purposi-ve sampling is a sampling technique with a cer-tain considerations.

Purposive in this case is determined by certain criteria, namely: 1) Respondents know the development of the companies performan-ce; 2) Minimum age of 17 years or graduated at least from high school education; 3) Respon-dents market their products in Denpasar; 4) Operating businesses at least for 3 years, so the number of samples used are 123 of the 130 eli-gible to be samples.

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There are three variables studied in this research: Exogenous Variables, namely, Market Orientation (X); Mediating Variable: Innovati-on (Y1); and Variable Endogenous: Company Performance (Y2). Each variable or research in-dicators are defined as follows.

Market Orientation (Exogenous Variable)Exogenous variable in this study is a

Market Orientation (X) which is measured in three dimensions namely competitor orien-tation, customer orientation and coordinati-on between functions whose dimensions are adapted from Liu et al. (2013) and Afsharga-seni et al. (2013). Indicators and dimensions to measure market orientation in this study are as follows.

Items of competitor orientation are as follows: 1) Responsive to threatening actions of competitors, 2) Discussion and sharing infor-mation about competitors’ actions, 3) Discussi-on on the strengths and competitors’ strategies.Items of Customer orientation are as follows: 1) Attention to after-sales service, 2) Commitment and customer-oriented, 3) Focus on customer satisfaction as the company goal, 4) Systematic customer satisfaction measurement.

Items of coordination among functions are as follows: 1) Everyone in the company contributes to create customer value, 2) The in-tegration of all business functions serves as mar-ket target, 3) Culture of all departments within a company is responsive in serving the needs and demands of customers.

Innovation (Mediating Variable)Mediating Variable in this study is the

company innovation measured in 4 dimen-sions: product innovation, process innovation, marketing innovation and organizational inno-vation. Indicators in measuring the company in-novation are adapted from Atalaya et al. (2013). Indicators and dimensions in measuring inno-vation are as follows.

Items of product innovation are as fol-lows: 1) The creation of attractive designs, 2) The addition of new products, 3) Quality cont-rol, 4) Standard quality, 5) Quality product de-velopment. Items of innovation process are as follows: 1) The use of the latest manufacturing installation in production process, 2) Compu-ter software as a tool in product development.

Item of marketing innovation is as follows product marketing in new market place (inter-net and social media). Item of organizational innovations is as follows: incompatibility of resources within an organization will be chan-ged according to each ability to promote the company.

Company Performance (Endogenous Variable)Endogenous variable in this study is the

performance of a company by applying three indicators in assessing the company performan-ce adapted from Keskin (2006). Indicators to measure the company performance are as fol-lows: 1) Productivity in the company, 2) Mar-ket Target (Market Share), 3) Revenue growth, 4) Profitability, 5) Shareholders Satisfaction.

Table 1. Respondent Characteristics

No Characteristics Classification Amount of Respondent Respondent Percentage

1 SexMale 66 53.7Female 57 46.3

Amount 123 100%

2 Education level

SMA 71 57,7S1 24 19.5D1 4 3,2D2 10 8,1D3 11 8,9D4 3 2,4

Amount 123 100%

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Data analysis technique used by the re-searcher in this study is Path Analysis. Path analysis is an extension of multiple linear reg-ression analysis to estimate stratified causal re-lationships among variables based on the theo-ry (Utama, 2009). Path analysis also seeks the level of effects of exogenous variables on the endogenous variables simultaneously or parti-ally, tests model suitability based on the data and theory of research, outlines the correlation between variables to see direct effect, indirect effect, total effect and the influence of other factors.

RESULTS AND DISCUSSION

Respondent CharacteristicsBased on table 1, grouping the respon-

dents by sex showed that the number of male

respondents are 53.7 percents and female res-pondents are 46.3 percents. The next grouping based on the type of education showed that the majority of respondents are having high school education with a percentage of 57.7 percents, followed by S1 education level with a percenta-ge of 19.5 percents, D3 education level with a percentage of 8.9 percents, D2 education level with a percentage of 8.1 percents, D1 education level with a percentage of 3.2 percents and the last education level of D4 with a percentage of 2.4 percents.

Test of Instrument Validity The result of validity test in table 2, shows

that all variables have correlation coefficient value with total score all statement items more than 0,30. It shows that all statement in the rese-arch instrument is valid.

Table 2. Test of Validity

No Variabels Statement Item Total Item Correlation Remarks 1 Market Orientation (X1) X1.a1 0,458 Valid

X1.a2 0,529 ValidX1.a3 0,420 ValidX1.b1 0,608 ValidX1.b2 0,582 ValidX1.b3 0,643 ValidX1.b4 0,614 ValidX1.c1 0,567 ValidX1.c2 0,498 ValidX1.c3 0,634 Valid

2 Innovation (Y1) Y1.a1 0,674 ValidY1.a2 0,668 ValidY1.a3 0,627 ValidY1.a4 0,667 ValidY1.a5 0,742 ValidY1.b1 0,672 ValidY1.b2 0,548 ValidY1.c1 0,618 ValidY1.d1 0,534 Valid

3 Performance (Y2) Y2.1 0,563 ValidY2.2 0,525 ValidY2.3 0,520 ValidY2.4 0,675 ValidY2.5 0,612 Valid

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Test of Reliability Instrument The result of the reliability test in table 3,

shows that the three research instruments have cronbach’s alpha coefficient more than 0,60. It can be stated that all instruments all reliable and can be applied to do reasearch.

Table 3. Test of ReliabilityNo. Variable Cronbach’s

AlphaRemarks

1 Market Orientation (X1)

0,732 Reliabel

2 Innovation (Y1)

0,757 Reliabel

3 Performance (Y2)

0,719 Reliabel

Test of Normality Table 4 shows that the value of Kolmogo-

rov Sminarnov (K-S) is 0,982, and the value of Asymp. Sig. (2-tailed) is 0,290. The result indi-cates that the regression equation model is nor-mal distributed because the value of Asymp. Sig. (2-tailed) 0,290 is more than the value of alpha 0,05.

Table 4. Test of Normality substructure 1

Unstandardized ResidualN 123

Kolmogorov-Smirnov Z 0,982

Asymp.Sig.(2-tailed) 0,290

Table 5. Test of Normality substructure 2

Unstandardized ResidualN 123

Kolmogorov-Smirnov Z 0,949

Asymp.Sig.(2-tailed) 0,328

Based on Table 5 it is stated that the value of Kolmogorov Sminarnov (K-S) is 0,949, and the value of Asymp. Sig. (2-tailed) is 0,328. It is indicated that the regression equation model is normal distributed because the value of Asymp. Sig. (2-tailed) 0,328 is more than the value ofi alpha 0,05.

Test of MultikolinearityTable 6 shows the value of tolerance and

VIF from variable of market orientation and in-novation. The value shows that the value of to-lerance for every variable is more than 10% and the value of VIF is smaller than10, it means that regression equation model is free from multiko-linearity.

Table 6. Test of Multikolinearity substructur 2

Variables Tolerance VIFMarket Orientation (X1) 0,730 1,370

Innovation (Y1) 0,730 1,370

Test of Uji HeterokedastisityThe result of SPSS output in table shows

that the value of sig. of market orientation va-

Table 7. Test of Heterokedastisity substructure 1

ModelUnstandardized Coefficients Standardized Coefficients

B Std. Error Beta T Sig.1 (Constant) .721 1.908 .378 .706

Market orientation .038 .045 .076 .841 .402

Tabl 8. Test of Heterokedastisity substructure 2

ModelUnstandardized Coefficients Standardized Coefficients

B Std. Error Beta T Sig.1 (Constant) .987 1.162 .850 .397

Market Orientation -.012 .030 -.043 -.402 .688Innovation .012 .028 .047 .440 .660

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riable is 0,402 is more than 0,05, it means that there is no effect on independent variables to-ward absolute residual.

The result of SPSS output in Table 8 shows that the value of sig from variable of market orientation and innovation is 0,688 and 0,660. The value is more than 0,05, it means that there is no effect between independent va-riable toward absolute residual. The model has no heteroskedastisity sympton.

Path Analysis Based on the path analyisis substructur 1

as presented in Table 9, the structural equation as follows :

Y1 = aX + β1 …………………….(1)Y1 = 0,519X + β1……………….. (2)

Based on the result of Path Analysis Substructure 2 as presented in the Table 10 , and its structural equitation as follows :

Y2 = cX + bY1 + β2 ………………… ...( 3 )Y2 = 0,206X + 0,274Y1 + β2 …………. ( 4 )

Based on the Substructure Model 1 and 2, Final Path Diagram Model can be arranged but the value of error deviation must be calculated first as follows:

Pei =

Pe1 =

= = 0,854

Pe2 =

= = 0,907

Based on the calculation of Error Effect (Pei), the result (Pe1) is 0,615 and (Pe2) is 0,518. The result of total determination coeffi-cient as follows :

R²m = 1 – (Pe1)2 (Pe2)2 = 1 – (0,854)2 (0,907)2

= 1 – (0,729) (0,822) = 1 – 0,599 = 0,401

The value of Total Determination is 0.401, it means that 40,1% performance variati-

Table 9. Path Analysis 1

ModelUnstandardized Coefficients Standardized CoefficientsB Std. Error Beta T Sig.

1 (Constant) 14.515 3.579 4.055 .000Market Orientation .567 .085 .519 6.687 .000

R1 SquareF StatisticSignifikancy

0,27044,7150,000

Table 10. Path Analysis 2

ModelUnstandardized Coefficients Standardized CoefficientsB Std. Error Beta T Sig.

1 (Constant) 11.845 1.756 6.747 .000Market Orientation .097 .046 .206 2.126 .036Innovation .118 .042 .274 2.821 .006

R2 SquareF StatisticSignificancy

0,17612,8100,000

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on is affected by the variation of market orienta-tion and innovation, and the rest 59,9% is exp-lained by other factor that not included into the model.

Examination criteria to explain the effect intrepretation for each variable as follows:

if Sig. t < 0.05 then H0 is rejected and H1 is accepted.

if Sig. t > 0.05 then H0 is accepted and H1 is rejected.

H0 : No effect on market orientation to innovation.

H1 : Market Orientation has positive and significant effect toward innovation

Hypothesis TestingBased on the results of the analysis of the

effect of market orientation to innovation, it was obtained Sig. t value of 0.000 with betta cooeffi-cient value of 0.519. Sig. t value of 0.000 <0.05 indicates that H0 is rejected and H1 is accepted. This result means that the market orientation has positive and significant effect to innovation. H0: No effect of Innovation to Company Per-formance.H1: Innovation has positive and significant ef-

fect to Company Performance.

Based on the results of the analysis of the effect of innovation to company performance it was obtained Sig. t value of 0.006 with betta coo-efficient of 0.274. Sig. t value of 0.006 <0.05 indi-cates that H0 is rejected and H1 is accepted. This result means that innovation has possitive and significant effect to the company performance.H0: No effect of market orientation to busi-

ness performance.

H1: Market Orientation has positive and sig-nificant effect to Company performance.

Based on the analysis of the effect of market orientation to company performance, it was acquired Sig. t value of 0.000 with betta coefficient value of 0.434. Sig. t value of 0.036 <0.050 indicates that H0 and H1 are accepted. This result means that the market orientation has positive and significant effect to company performance.

Table 11 shows th effect of variable X1 → Y1, it is market to innovation has direct effect of 51.9 percents therefore it results in a total effect of 51.9 percents. The effect of X1 → Y2, name-ly market orientation to company performance where direct effect of market orientation is 20.6 percents and through indirect effect, namely, innovation of 14.2 percents therefore it resulted in a total effect of 34.8 percents. Then, the last one is the effect of Y1 → Y2, namely, innovation to company performance where the direct effect is 27.4 percents, therefore it resulted in a total effect of 27.4 percents.

Table 12. Test of Sobel

Nilai Z Sig4,448 0,000

Based on the result of Sobel in Table 12, it shows that the result of tabulation Z = 4,448 > 1,96 with signifiantcy level of 0,000 < 0,05, it means that mediator variable, it is innovation is calculated significantly mediate the effect on market orientation to company perfor-mance.

Table 11. Direct and Indirect Effect As Well as Total Effect of Market Orientation (X1), Innovation (Y1), and Company Performance (Y2)

Variable Effect Direct Effect Indirect effect Through Innovation (Y1) ( 1 x 3)

Total Effect

X1 → Y10,519 - 0,519

X1 → Y20,206 0,142 0,348

Y1 → Y20,274 - 0,274

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RESULTS AND DISCUSSION

Effect of Market Orientation towards InnovationThe hypothesis testing on the effects of

market orientation to innovation showed that market orientation has significantly positive ef-fect to the innovation. It means that the better a company understands the market through an approach of orientation to customers, competi-tors and inter-functional, the more increase the innovation of garment companies in Denpasar City will be.

The result of this research supports the findings of Bigliardi & Domino (2009); Bigliar-di et al. (2011), Hoq & Horbani (2009), Baker & Sinkula (2007) dan Mahmoud et al. (2016) stating that market orientation has positive and significant effect to innovation.

The Effect of Market Orientation to Company Performance

The hypothesis testing on the effect of market orientation to company performance showed that market orientation significantly has positive effect to the company performance. It means that the better a company understands the market through an approach of orientation to customers, competitors and inter-functional the better the performance of a garment compa-ny in Denpasar City.

The result of this research supports the findings of Ahimbisiwe (2013) Salim & Sulai-man (2011), Jhonson et al. (2009), dan Soren-sen and Madsen (2012) explaining that market orientation has positive and significant effect to company performance.

The Effect of Innovation to Company Perfor-mance

The hypothesis testing on the effect of innovation to company performance attributed that innvoation significantly has positive effect to the company performance. It means that the better and the more frequent a company car-rying out innovation both to create new pro-ducts, innovation in terms of production pro-cesses, innovation in product marketing and

innovation in company organizations, the more increase the performance of a garment compa-ny in Denpasar City.

The result of this research supports the findings of Jyoti and Sharma (2012), Ahim-bisiwe et al. (2013), Lages & Lages (2011), Littunen & Varis (2010); Lin et al. (2008) dan Sorensen and Madsen (2012) describing that innovation has positive and significant effect to the company performance.

The Role of Innovation in Mediating Market Orientation to Company Performance

The hypothesis testing on the role of inn-ovation in mediating market orientation to the company performance in a garment company in Denpasar resulted in that innovation is able to mediate market orientation to the company performance of Garment Company in Denpa-sar. Based on the result of Sobel Test in Table 12, it shows that the tabulation Z = 4.448> 1.96 with a significance level of 0.000 <0.05, meaning that the mediating variable, namely, innovation is significantly assessed to mediate the effects of market orientation on company performance.

The result of this study supports the fin-dings of Johnson et al. (2009) Theoharakis & Hooley (2008), Olavarrieta & Friedmann (2008) stating that the relationship between market orientation applied in conjunction with the innovation to company performance showed a positive and significant results.

Implications and Limitations of ResearchThis study provides practical implications

for the Garment Company in Denpasar City to implement market orientation culture well by indicating information about the needs of custo-mers and data of competitors that are coordina-ted into the entire functions in the company to create quality products in accordance with mar-ket demands and able to make a good strategy to outperform competitors.

Further implication, in Innovation variab-le, the result obtained was that Garment Com-panies in Denpasar City applied the concept of innovation well where Garment Companies in

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Denpasar City always carry out creative reforms in adapting new ideas with market-oriented de-velopment in order to obtain better company performance. Where in product innovation, a company has been able to develop different ty-pes of goods to complete the shortcomings of previous products and emphasize quality. Pro-cess innovation in which the Garment Com-panies in Denpasar City have made changes in new production techniques using software so that effectiveness and the efficiency are obtai-ned in term of time and cost in the production process.

Theoretical implication derived from this research is that market orientation and innova-tion have positive and significant effect to com-pany performance. Innovations is able to media-te the effects of market orientation to Company Performance significantly and Innovation is a partial mediating variable. This shows that mar-ket orientation and innovation are all factors af-fecting the company performance.

Several limitations of research can be drawn from this study are as follows: 1) the scope of this research is only limited to the Gar-ment Company in Denpasar City, so the results of this study cannot be generalized to Garment Company Garment outside Denpasar City; 2) this study was conducted only at a certain time that is at one time where the existing environ-ment will continue to experience a dynamic change.

CONCLUSIONS AND RECOMMENDATION

Based on the results of the discussion, a number of conclusions can be taken as follows: 1) Market orientation has positive and signi-ficant effect to innovation. The results of this research indicated that garment companies in Denpasar have good market orientation and were able to increase innovation. Good inno-vation of products, processes, marketing and organization owned by garment companies in Denpasar City; 2) Market orientation has po-sitive and significant effect to company perfor-mance.

The results of this study showed that if garment companies in Denpasar City have good market orientation, they are able to imp-rove company performance. The improvement of garment company performance in Denpasar City can be seen from the current productivi-ty of the companies, target market is right on target, revenue and profit growth and share-holders’ or owners’ satisfaction; 3) Company innovation has positive and significant effect to company performance.

The results of this research indicated that garment companies in Denpasar City have carried innovation well and can improve the company performance; 4) Innovation is able to mediate market orientation to company perfor-mance. The results of this study indicated that if garment companies in Denpasar carried out market orientation properly as the result the company is able to respond to competitive ac-tion of competitors quickly, committed to cus-tomers’ satisfaction and all departments within the company can work together in customers’ satisfaction, then the orientation attitudes of the company is able to increase innovation and able to achieve improvement of performance within the company.

Based on the discussion and conclusions, the suggestions that can be provided to the rele-vant parties are as follows: 1) for researcher, this research is expected to be additional resources to strengthen the results of studies related to the market-oriented variable on garment com-panies with innovation as a mediating variable on garment companies in Denpasar City; 2) for garment companies, all departments of the company are expected to be fast and responsi-ve in serving the needs and demands of custo-mers in order to achieve customers’ satisfacti-on; 3) the company should control the quality of the products more frequently so that the company can correct errors in the production process; 4) the company should apply market orientation cultu-re and higher innovation in order to compete and the products are well accepted by customers so de-mands will increase and automatically the products can improve revenue growth and profitability.

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