Network capability, relational capability and Indonesian manufacturing SME performance: an empirical analysis of the mediating role of product innovation

The relational capability can create networks and build relationships to be an essential part of a company to improve business performance. This study aims to empirically prove the influence of knowledge sharing on product innovation, the effect of network capability on product innovation and business performance, the effect of relational ability on product innovation and business performance, and the effect of product innovation on business performance. The sample of this research was created from owners of batik manufacturing SMEs in Lasem, Rembang, Central Java. The study used SEM-PLS for analysis. The results found that (1) knowledge sharing had a positive and significant effect on product innovation; (2) network capability had a positive and significant impact on product innovation and business performance; (3) relational ability had a positive and significant effect on product innovation and business performance; (4) greater effect of product innovation affects business performance. The role of product innovation is to mediate between knowledge sharing and marketing performance. SMEs can improve business performance.