Journal of Talent Development and Excellence (JTDE) ISSN:...

Journal of Talent Development and Excellence (JTDE)

ISSN: 18690459

http://iratde.com/index.php/jtde

Scopus Index Q2, SJR=0.5

Vol. 12 No. 1 (2020): Issue 2020/1

Link Scimagojr:

https://www.scimagojr.com/journalsearch.php?q=21100208309&tip=sid&clean=0

Editorial Board Editor-in-Chief:

Wilma Vialle - University of Wollongong, Australia

Dr Wilma Vialle is a Full Professor in Educational Psychology and Associate Dean of the Faculty of Education, University of Wollongong. She teaches child development, psychological foundations of education and gifted education, and supervises a number of postgraduate research students in related fields. Her interests are predominantly in the nature of intelligence and creativity, with a particular focus on giftedness. She has published extensively on topics related to giftedness and children’s learning. She is the chief editor of the ‘Australasian Journal of Gifted Education’ and is on the editorial board of several international journals. In 2006 she was awarded the Eminent Australian for her contributions to gifted education.

Associate Editors Bettina Harder - Institute of Education, Educational Psychology, University Erlangen-Nuremberg, Germany

Bettina Harder PhD is senior lecturer at the Chair of Educational Psychology at the University of Erlangen-Nuremberg, Germany. She is vice-director and research coordinator of the State-wide Counseling and Research Center for the Gifted. Her research projects focus on giftedness and the development of achievement excellence from different perspectives thereby contrasting common models of giftedness theoretically and empirically. She has published books, chapters and articles in the fields of talent development, excellence, counseling, and educational psychology.

Jiannong Shi - Academy of Sciences, Development and Education, Beijng, China

Professor Jiannong Shi is director of the Division of Developmental and Educational Psychology, Institute of Psychology of the Chinese Academy of Sciences, and also the director of the Research Center for Supernormal Children, Institute of Psychology of the Chinese Academy of Sciences. He is a former president of the Asia-Pacific Federation of the World Council for Gifted and Talented Children. His research on giftedness and talent development include neuropsychological as well as educational studies and embrace various age groups and domains. He has published books, chapters and articles in the fields of talent development, educational psychology and education, among them Discovering Gifted Children und Developmental Psychology of Gifted Children. He was visiting scholar at various Univeristies such as Yale University, University of Michigan or Ludwig-Maximilians-Universität Munich. He twice received the Excellent Scholar Award.

International Advisory Board Carmen M. Cretu University of IASI Romania

Ivan Ferbežer University of Ljubljana Slovenia

Elena Grigorenko Yale University United States

Hans Gruber University of Regensburg Germany

Osamah Maajeeny King Abdul Aziz University Saudi-Arabia

Peter Merrotsy University of New England Australia

Petri Nokelainen University of Tampere Finland

Marion Porath University of British ColumbiaCanada

Wolfgang Schneider University of Würzburg Germany

Barbara Schober University of Vienna Austria

Robert Sternberg Tufts University United States

Ai-Girl Tan Nanyang Technological University Singapore

Javier Tourón University of Navarra Spain

Wilma Vialle University of Wollongong Australia

Mantak Yuen The University of Hong KongChina

Ad-hoc Reviewers: Markus Dresel University of Augsburg Germany

Nicolas Delorme Josephe Fourier University France

Kurt A. Heller University of Munich Germany

Sean Horton University of Windsor Canada

Martin Lames Technical University Munich Germany

Richard Lange National College of Education,National-Louis University United States

Markus Raab German Sport University Cologne Germany

Heiner Rindermann University of Graz Austria

Diane Ste-Marie University of Ottawa Canada

Kevin Till Leeds Metropolitan University United Kingdom

Klaus Urban University of Hannover Germany

Detlef Urhahne University of Munich Germany

Chih-shen Owen Lo University of British Columbia Canada

Hella Schick University of Cologne Germany

Arne Güllich Institute of Applied Sports Science Germany

Ilka Seidel Karlsruhe Institute of Technology Germany

Damian Farrow Victoria University Australia

Dany MacDonald University of Prince Edward Island Canada

Stephen Cobley Leeds Metroplitan University United Kingdom

Dr. Marion Händel University of Erlangen-Nuremberg Germany

Klaudia Kramer University of Erlangen-Nuremberg Germany

Current Issue

Vol. 12 No. 1 (2020): Issue 2020/1 Published: 2020-05-14

Articles Symbiosis Mutualism Village Credit Institutions and Business Strategies in Bali

Indonesia I Gusti Ayu Ketut Giantari, I Gusti Ngurah Jaya Agung Widagda K, Ni Nyoman Kerti Yasa, Made Setini, Munadjat Wardoyo 01-14

Reading Comprehension of Elementary School Students at DKI Jakarta

Fahrurrozi, Ratna Sari Dewi, Apri Wahyudi, Uswatun Hasanah 15-33

A Comparison Of Tourism Sectors In East Java In Facing Spending Shock Of Domestic

And Foreign Tourists Ignatia Martha Hendrati, Imam Mukhlis, Hary Soegiri, Fifi Ulid Khoiro Taufiqo 34-43

o PDF Under Publication Process

Author 1, Author2 44-54

Under Publication Process Author 1, Author2 55-63

The Metamorphosis Of Impression In Corporate Social Responsibility Reporting: Safety And Healthy Work Management System Alimuddin, Andi Wa Ode Suastina 64-71

o PDF Communication Model of Line’s Account Managers in Managing Consumers

Anna Gustina Zainal, Toni Wijaya, Andy Corry Wardhani 72-84

o PDF The Oligarchic Politic of Chinese Indonesians in Lampung

Arsyad Sobby Kesuma, Aris Risdiana, Reza Bakhtiar Ramadhan, Imam Nawawi 85-99

Translation Technique, Ideology and Culture Ria Saraswati, Zuriyati, Ratna Dewanti 100-111

Implementation of E-Planning, E-Budgeting and Government Internal Control Systems for Financial Reporting Quality at Local Governments in Indonesia Rindu Rika Gamayuni 112-124

Talent Development & Excellence 1

Vol.12, No.1, 2020, 01-14

ISSN 1869-0459 (print)/ ISSN 1869-2885 (online)

© 2020 International Research Association for Talent Development and Excellence

http://www.iratde.com

Symbiosis Mutualism Village Credit Institutions and Business

Strategies in Bali Indonesia

I Gusti Ayu Ketut Giantari

Faculty of Economics and Business, Udayana University, Bali,Indonesia

[email protected]

I Gusti Ngurah Jaya Agung Widagda K

Faculty of Economics and Business, Udayana University, Bali, Indonesia

[email protected]

Ni Nyoman Kerti Yasa

Faculty of Economics and Business, Udayana University, Bali,Indonesia

[email protected]

Made Setini Faculty of Economics and Business, Udayana University, Bali,Indonesia

[email protected]

Munadjat Wardoyo

Lecturer at School of Architecture, Planning, and Policy Development in Technology

Institute of Bandung, Indonesia.

[email protected]

Abstract

The Village Credit Institution (LPD) is very important for traditional villages in Bali,

established to improve the economy of rural communities. LPD helps provide capital for

small and medium entrepreneurs. LPD also competes with other. Various strategies can be

applied to win the competition such as innovation, differentiation, and partnership. The

study describes the implementation of the business strategy and its consideration of the

performance of LPD in the District at the Village Credit Institution in Bali Indonesia with

122 participants. The entire population was taken as respondents. However, only 73

questionnaires were sampled (60% response rate). The analysis technique used is SEM

based on PLS. Research shows that the innovation strategy, differentiation strategy, and

partnership strategy greatly effect on LPD business performance in Indonesia. The results

of the study imply that LPD managers are expected to provide innovative services,

increase competence and to enhance partnerships with stakeholders.

Keywords: Innovation, Differentiation, Partnership, Business performance

1. Introduction

The Village Credit Institution (LPD) plays a very important role for traditional villages in

Bali, because the LPD aimed to encourage the economy of rural communities. One of the important

functions of the LPD is assisting in the provision of venture capital for MSMEs (Micro and Medium


Vol.12, No.1, 2020, 01-14




Enterprises) in the vicinity. Nowadays the development of LPDs in Bali has been growing rapidly,

but the development of LPDs has experienced ups and downs, as many as 149 units of LPDs are no

longer in operation, 58 units are classified as unhealthy, 199 units are not healthy and 242 units are

quite healthy.

In the current business competition, the LPD also competes to maintain its existence against

the onslaught of nearby competitors such as BPR (Bank Credit People) and Savings and Loan

Cooperatives. Various strategies were carried out to win the competition, including the innovation

strategy, differentiation strategy, and partnership strategy. Innovation is the company's ability to

find new ideas by offering innovative products. In the context of LPD, innovation is carried out in

the process of product development, service process and marketing by utilizing technology [30]

(Yasa et al., 2018). Research on the effect of innovation on business performance has been conducted

by several researchers including Giantari et al. (2018), Hilmi et al. (2010), Kalkan et al. (2014), Rhee et

al. (2010), Semuel et al. (2017) and Zehir et al. (2015) which states that innovation factors that play a

role in improving business performance Innovation sometimes risks not being accepted by the

general market, uncertainty arises, certainly makes a high initial investment and sustainable, can

imply risk, uncertainty, the price premium for innovative products, customer loyalty, barriers to

entry for potential imitators, and differentiation from competition generally seem to outweigh costs

according to Rosenbusch et al. (2011)

In addition to LPD innovation, it can also carry out a differentiation strategy which is a

strategy carried out by LPD to offer a different quality of service compared to competitors.

Differentiation affecting business performance has been done by several researchers including

Anggraini & Sukaatmadja (2015), Banker et al. (2014), Giantari et al. (2018), Nyokabi et al. (2019),

Semuel et al. (2017), Setiawan (2017), Tampi (2015) and Zehir et al. (2015) which shows that

differentiation has a positive and significant effect on business performance. Giantari et al. (2018)

also found that differentiation mediated significantly between market orientation and business

performance of SMEs Textile in Bali.

Partnership is a strategy that can also be carried out by LPD in Badung Regency, namely

partnership with its competitors, suppliers and with its customers. Partnership cooperation is

carried out with various parties, especially Universities in enhancing HR skills to increase the

mastery of science and technology. Partnerships with competitors can create opportunities to build

networks to innovate Gardet & Mothe (2013). Partnership is also one of the strategies in anticipating

a state of crisis in the economy of a Margaretha bank (2007). Partnerships can be done with one

relationship bank or with many banks Degryse and Ongena(2001). Research on the effect of

partnerships on business performance has been conducted by several researchers including

Anggraini & Sukaatmadja (2015), Mustikaningsih et al. (2019) and [24] Sukwadi et al. (2013).

Research results Mustikaningsih et al. (2019) shows that the partnership strategy has a significant

effect on business performance. So the cooperation strategy is important to consider as a strategic

solution to improve company performance. Differing opinions expressed by Margaretha (2007),

partnerships do not always produce good business performance, partnerships with one bank and

partnerships with many banks have no difference in improving performance or increasing bank

assets, conducted at the capital market reference center Research, has debt relationship with banks

and have business relations with one and many banks that have been listed on the Indonesia stock

exchange in 2004.

What if a bank applies these three strategies, namely innovation and differentiation strategies that

have positive and negative, and partnerships that do not necessarily produce performance the good

one. Does the BPD Bank in Badung Bali have a positive influence when these three strategies are

synergized, so the purpose of this study is to explain the effect of the innovation strategy,

differentiation strategy and partnership strategy on LPD performance in Badung Regency, if these

strategies work together in one work concept?


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2. Review Literature and Hypothesis Development 2.1 Business Performance Business

Performance is a factor commonly used to measure the impact of a company's strategy. The

company's strategy is always directed to produce good performance in the form of marketing

performance and financial performance (Ferdinand, 2010: 6). Marketing performance is one concept

that can measure the market performance of a product. The company can see its performance both

internally and externally which can be known from the market performance of its products.

Mustikaningsih et al. (2019) describe performance as a result of implementing management

strategies as measured through indicators of sales volume, market share, and profitability. The

definition is based on the opinion Wheelen et al. (2014) which states performance as a result of

activities that include outputs from the strategic management process.

According to Ferdinand (2010: 116) in general marketing performance is measured through

sales value such as return on investment (ROI) or return on assets (ROA). However, this measure is

seen as a measure aggregate produced through accounting and financial processes, but does not

directly describe management activities, especially marketing management. Hubbard and Beamish

(2011) have an opinion that in terms of marketing aspects, business performance can be measured

through return on investment (ROI), return on equity (ROE), return on assets (ROA), profitability,

and the level of liabilities to assets, income per share, sales growth, and growth asset. Performance

measurement can generally be displayed in the form of a scorecard that can provide comprehensive

data to decision-makers in identifying problems and making solutions to improve performance

Gawankar et al. (2015).

2.2 Innovation Strategy Innovation

This refers or product successfully Nasution et al. (2011). Innovation is also related to

breakthroughs about new products and ideas or new processes. Innovation makes it possible to

always be open to new ideas as aspects of culture, and efforts to find new ways to do things.

Innovation will bring up creative ideas in operating methods. Companies are required to be able to

create new thoughts, new ideas, and offer innovative products and service improvements that

satisfy customers.

According to Kalkan et al. (2014) defines innovation as the implementation of new ideas in

creating value. Hilmi et al. (2010) explain innovation is a change in the method of doing business

that makes more effective use of changes in organizational structure, policies, work methods, and

manufacturing procedures, to make more effective financing, or marketing of a product or service.

To create innovation, companies need to create an internal environment that facilitates a culture of

innovation characterized by flexibility and speed to change to respond to new opportunities

(Urbancova, 2013). Innovations also include changes that affect policy, resource allocation, and

other factors related to an organization's social structure. Innovation is more an aspect of

organizational culture that reflects the level of openness of the search for new ideas, rewards for

workers for new ideas, the ability to learn, the implementation of ideas into real things (Rhee et al.,

2010).

2.3 Differentiation Strategy

Differentiation strategy is a strategy that aims to produce products or services that are

considered unique in the industry and is directed at consumers who are relatively insensitive to

price (David & David, 2019: 141) Differentiation strategy chosen by the company/business


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organizations that have a scope competition (competitive scope) wide. Companies try to have

uniqueness in certain dimensions of the products they produce, where the uniqueness is considered

valuable by consumers (Solihin, 2012: 197). According to Assauri (2015: 180), companies that offer a

variety of and product mix that are tailored to the needs and desires of different groups of

consumers or buyers, with separate marketing programs are expected to achieve the highest level of

sales in each market segment. Companies that use this strategy aim to strengthen the confidence of

certain consumer groups in products that are produced and marketed, so that purchases will be

made repeatedly (Assauri, 2015: 180).

The differentiation strategy offers different stages of differentiation. Kotler and Keller (2012:

384-388) explain the dimensions that companies can use to differentiate their market offer include: 1)

Product differentiation, personnel differentiation, channel differentiation, and image differentiation.

David & David (2019: 143) say effective differentiation has greater product flexibility, greater

comparisons, lower costs, increased services, less maintenance, greater comfort, and other features.

The differentiation strategy has challenges for companies that implement it. According to Assauri

(2015: 180-181), there are strengths and weaknesses to this strategy. Companies that succeed in

implementing the differentiation strategy feel the impact of increased sales accompanied by better

product positions in each market segment, and total company sales can be increased by the variety

of products offered. The weakness of this strategy is the tendency to increase production costs for

product modification, administrative costs, promotion costs, and investment costs. Also, companies

must find sources of uniqueness that are durable and not easily imitated quickly and cheaply by

competitors (David & David (2019: 144).

2.4 Strategic Partnership (partnership)

A partnership strategy is an attempt to create a competitive advantage in an industry and

collaborate with other companies (Wheelen et al. 2015). The partnership strategy has been used by

many competing companies throughout the world. The partnership strategy includes a vertical

relationship consisting of producers and consumers and a horizontal relationship consisting of side

partners and internal partners (Mustikaningsih et al., 2019). The development of partnership

networks can be divided into three phases which consist of the contract/agreement phase, the

partnership development phase, and the integration network partnership stage (Vanags et al., 2018).

A business partnership is not a new concept. Business partnership implies the existence of business

cooperation relationships between various parties that are synergistic, voluntary, and are based on

the principle of mutual need, mutual support, mutual reinforcement, and mutual benefit. The

principle of such cooperation can overcome the limitation of business potential inherent in one

business unit. Idris & Primiana (2015) describe the dimensions of strategic partnerships include

collaborative position, risk-pooling and risk-sharing resources, sharing of resources and expertise

completeness, ability to learn from partners (partner), the creation of the alliance, and the weight of

the various alliances. Hitt et al. (2015) defines partnership as a strategy between one or more

companies collaborating to expand their operations. The main reason companies use partnerships is

to get a globalized strategy (David and David, 2019: 148).

The partnership strategy is a temporary relationship and contract between companies that

remain independent, which aims to reduce uncertainty surrounding the realization of strategic

goals partner interdependence by coordinating or carrying out several activities together

(Mustikaningsih et al., 2019). Some partnerships are vertical (between business scales), that is

between small businesses and medium businesses or large businesses, and some are horizontal at

the same business scale. However, in general, what is meant by partnership is between business

scales. Various kinds of empowerment strategies or programs that are partnership strategies are

carried out by companies to improve business performance (Yasa et al., 2014). Collaboration carried

out by two or more companies is based on mutual trust, openness to share risks, and benefits in


Vol.12, No.1, 2020, 01-14




enhancing competitive strategies to produce better company performance than if not collaborating

(Mustikaningsih et al., 2019).

2.5 Conceptual Framework and Research Hypothesis

The conceptual framework of this study is presented in the following figure.

Figure 1. Research Conceptual Framework

Source: (Giantari, 2019)

2.6 The Research Hypothesis

Effect of Innovation Strategies on Business Performance

Innovation has come to the attention of researchers and business practitioners in today's

competitive environment because innovation is a key factor in world economic growth and

company growth (Yasa et al., 2018: 8). In this condition, research and business strive to develop

strategies and resources in making innovations to maintain the sustainability of competitiveness

and increase revenue and profit growth in the long run. Much of the attention of researchers and

practitioners to innovation has implications for the emergence of variability in the definition of

innovation. However, in the context of LPD, an innovation strategy needs to be done in the process

of product development, service processes, and marketing by utilizing the development of

Information Technology.

Innovation strategy research and the impact of business strategies have been carried out by

Giantari et al. (2018), Hilmi et al., 2010), Kalkan et al. (2014), Rhee et al. (2010), Semuel et al. (2017)

and Zehir et al. (2015) so the hypothesis in this study:

H1: Innovation has a significant positive effect on business performance

The Effect of Differentiation Strategy on Business Performance

The success of the differentiation strategy to create competitive advantage and produce good

performance is highly dependent on the company's success in innovation (Kaliappen & Hilman,

2014 ). Innovation through several new product and service introductions, accompanied by rapid

changes in the administration system and changing the mindset of employees, will be able to

produce a variety of products to meet the needs of each customer (Semuel et al., 2017). Various

frameworks, such as TRA (Theory of Reasoned Action) and Technology Acceptance Model, contribute

to the development of innovation in banking.

Partnershaip

Innovation

Performance

Supplier

Customer

Competitor

Differentiation


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Research results Nyokabi et al. (2019) showed that the differentiation strategy and corporate

structure were able to improve the organizational performance of starred hotels in Kenya. Research

conducted by Semuel et al. (2017) found that the differentiation strategy affected hotel performance

in Surabaya. Anggraini & Sukaatmadja (2015) found that the differentiation strategy had a

significant positive effect on the performance of the culinary industry in the city of Denpasar.

Research Banker et al. (2014) found that the differentiation strategy was related to the company's

sustainable performance. Kotler and Keller (2012: 384-388) state that a differentiation strategy

consisting of product differentiation, price differentiation, distribution differentiation, and image

differentiation can improve company performance. Tampi (2015) also states that the differentiation

strategy has a significant positive effect on Telkomsel's business performance. Thus the hypothesis

is proposed as follows.

H2: Differentiation has a significant positive effect on business performance

Effect of Partnership Strategies on Business Performance

Research results on partnership strategies on business performance have been widely carried

out Anggraini & Sukaatmadja (2015), Mustikaningsih et al. (2019) and Sukwadi et al. (2013).

Research results Mustikaningsih et al. (2019) shows that to improve business performance, strategic

partnerships need to be carried out optimally through various efforts including strengthening

collaboration in aligning supply chains and developing dynamic capabilities in renewable energy

industry companies in Indonesia. Furthermore Anggraini & Sukaatmadja (2015) states that the

application of partnership strategies has an impact on improving the performance of culinary

business in the city of Denpasar.

Research conducted by Sukwadi et al. (2013) aims to investigate the readiness of operations

and partnerships between suppliers and companies in improving the performance of garment small

and medium enterprises (SME) supply chains in Central Java. The results of this study indicate that

the readiness of the supply chain and partnership strategy is very important for garment SMEs

because this strategy affects the performance of the company's supply chain.

H3: Partnership has a significant positive effect on business performance.

3. Methodology

The population was 122 LPDs in Badung Bali, Indonesia. The sample size in this study was

122 respondents, but after the questionnaires were distributed back as many as 73 questionnaires

(response rate 60%). This sample size is already representative because according to (2006), the PLS

analysis requirements indicate that the number of samples taken does not have to be large. Samples

were taken using a questionnaire. The analysis technique used is SEM based on PLS (Partial Least

Square).

4. Discussion

4.1 Descriptive Analysis of Respondent Characteristics

This study targets LPD managers in Badung Bali, Indonesia. Characteristics of respondents are

classified into four aspects including gender, age, education, and tenure. From the results of data

analysis, the majority of respondents who became LPD managers in Badung Bali, Indonesia were 59

men or 80.82%. Based on age classification, respondents aged between 45 - 49 years dominate as

many as 20 people or 27.40%, from the level of education that dominates are Strata 1 or bachelor as

many as 34 people or 46.58% and tenure of> 10 years as many as 44 people or 60.27%.


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4.2 Analysis of the Research Model with the Method Partial Least Square (PLS)

This study uses the PLS analysis technique with the SmartPLS Program. From the results of

data processing, PLS analysis can be done by evaluating the structural equation model. In this

evaluation, there are two basic evaluations. First, evaluating the measurement model (outer model)

to find out the validity and reliability of indicators that measure latent variables; the instrument

validity and reliability test criteria in this study refer to discriminant validity, convergent validity, and

composite reliability. Second, assess the inner model or structural model to see the relationship between

constructs, the significance value and the R-square of the research model. Testing Inner model in PLS

analysis is done through bootstrap resampling.

Evaluation of the Measurement Model (Outer Model)

Outer model or measurement model is an assessment of the validity and reliability of research

variables. There are three criteria for assessing the outer models namely discriminant validity,

composite reliability, and convergent validity. Based on the three criteria for measuring the

measurement model from the results bootstrapping in the PLS method, testing the measurement

model for each indicator that reflects the construct or latent variable can be explained as follows.

Discriminant validity

Testing discriminant validity in research using score square root of average (AVE) to check

(testing) whether the research instrument is valid in explaining or reflecting latent variables.

Discriminant validity used is square root of average variance extracted (√AVE). If the square root of the

average variance extracted (√AVE) value of each variable is greater than the correlation value between

the latent variable and other latent variables, the instrument variable is said to be valid discriminant.

Table 1.

Values AVE, √AVE

VariableResearch AVE √AVE

Innovation(X1) 0753 0.867

Differentiation (X2) 0 771 0.878

Partnerships (X3) 0.595 0.771

Performance (Y) 0775 0,880

Customers 0827 0909

Suppliers 0703 0.838

Competitors 0.761 0.872

Source: PLS data processing results, 2019

Test results in Table 4.11 show that the square root of average variance extracted (√AVE) values

of all variables are greater than the correlation between latent variables and other latent variables so

that the instruments of each variable are valid discriminant. Root values of AVE are all variables

above 0.70 (tolerance limit) so that the research instruments meet the discriminant validity criteria.

Convergent validity


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Convergent validity measures the validity of an indicator as a measure of construct, which

can be seen from outer loading. From the value outer loading, it can also be interpreted as the

contribution of each indicator to the latent variable. Outer loading of an indicator with the highest

value means that the indicator is the strongest measure of the latent variable in question. More

clearly follows the results of the analysis and evaluation of measurement models for each research

variable.

Table 2.

Outer Loading Each Indicator

Variable / Dimension / Indicator Outer

Loading

Innovation:

Offering more innovative services to customers (X1.1) 0.932

Doing product modifications (X1.2) 0.902

Offering unique services (X1.3) 0.794

Differentiation:

Product differentiation (X2.1) 0.814

Differentiation of personnel (X2.2) 0.902

Service differentiation (X2.3) 0.868

Image differentiation (X2.4) 0.885

Partnership:

Partnership with suppliers (X3.1)

Exchange of information between LPD and suppliers (X3.1. 1) 0.836

Participation of suppliers in determining interest rates (X3.1.2) 0.893

Supplier participation in enhancing HR competencies (X3.1.3) 0.784

Partnership with customers (X3.2)

Periodic customer contact (X3.2.1) 0.912

Share information about the market (X3.2.2) 0.914

Provide increased business knowledge to customers (X3.2.3) 0.903

Partnership with competitors (X3.3)

Mutual assistance in providing funds (X3.3.1) 0.808

Sharing information with debtors (X3.3.2) 0.911

Together conducting social activities (X3.3.3) 0.895

Business Performance:

Growth rate of LPD increase (Y1.1) 0.915

Credit growth rate (Y1.2) 0.923

Profit growth rate (Y1.3) 0.844

Customer satisfaction level (Y1.4) 0.873

LPD service quality (Y1.5) 0.843

Source: PLS data processed, 2019

All indicators in each variable have value outer loading above 0.70 which means that the

indicators are valid and able to measure latent variables.

Composite Reliability

Composite reliability tests the value reliability between the indicators of the construct that

constitutes it. Results are composite reliability said to be good, if the value is above 0.70.test results of

composite reliability the measurement model are presented in Table 4.13.


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Table

3.Testing Instrument Reliability

VariableResearch Construct Reliability Information

Innovation(X1) 0.924 Reliable

Differentiation (X2) 0.909 Reliable

Partnership (X3) 0.914 Reliable

Performance (Y) 0.945 Reliable

Source: PLS data processed, 2019

Based on the test results in Table 4.13 obtained the value of composite reliability of all

variables above 0.70. These results mean that the four latent variables analyzed have good

composite reliability and it is concluded that all instruments used in this study have met the criteria

or are suitable for use in the measurement of the four latent variables: innovation, differentiation,

partnership, and performance.

Testing of Inner Models and Research Hypotheses

Inner models or structural models evaluated by looking at the value coefficient path of the

relationship between latent variables. From the PLS model output, structural model testing and

hypotheses are performed by looking at the estimated path coefficient values and critical point

values t-(t-statistics) that are significant at α = 0.05.

Figure 2. Results of analysis Partial Least Square

Table 4.

Direct Influence Test Results

Original

Sample (O)

Sample

Mean (M)

Standard

Deviation

(STDEV)

T

Statistics

(| O /

PValu

es


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STDEV |)

Differentiation->

Performance 0.281 0.289 0.120 2,352 0.019

Innovation ->

Performance 0.322 0.315 0.095 3.389 0.001

Partnership ->

Performance 0.322 0.319 0134 2406 0016

Partnership ->

Customer 0881 0.880 0.036 24 377 0.000

Partnerships ->

Suppliers 0882 0876 0048 18 444 0000

Partnership ->

Competitor 0889 0888 0038 23 294 0000

Source: primary data is processed, 2019

Based on Table 4:15 obtained p-value and t statistics for each variable is explained as follows.

(1) The p-value of the variable differentiation on performance was 0.019, compared with a

significance value of 0.05. Because the p-value <significant (0.024 <0.05) with a beta value of

positive 0.281 and t statistics value of 2.352 compared with t-table with a significant 0.05 and

degrees of freedom N - k = 73 - 4 = 69 of 1,994. Because the value of t-statistics> t-value (2,352>

1,994), it can be concluded that differentiation has a significant positive effect on performance.

(2) The p-value of the innovation variable on performance is 0.001 compared to the significance of

0.05. Because the p-value <significant (0.001 <0.05) with a beta value of positive 0.324 and t

statistics value of 3.491 compared with t-table with a significant 0.05 and degrees of freedom N -

k = 69 of 1.994. Because of the value of t-statistics> t-value (3.491> 1.994), it can be concluded

that innovation has a significant positive effect on performance.

(3) The p-value of the partnership variable on the performance of 0.016 is compared with a

significance of 0.05. Because the p-value <significant (0.021 <0.05) with a beta value of positive

0.321 and t statistics value of 2.313 compared with t-table with a significant 0.05 and degrees of

freedom N - k = 69 of 1.994. Because the value of t-statistics> t-value (2.313> 1.994), it can be

concluded that the partnership has a significant positive effect on performance.

5. Results

Effect of Innovation Strategies on LPD Business Performance

Innovation strategies have a positive and significant effect on business performance with a p-

value of 0.001, meaning the better the innovation strategy undertaken by the LPD in Badung Bali,

Indonesia the higher the business performance. Innovation strategies are measured by three

indicators, namely offering more innovative services, modifying products and offering unique

services. Of the three indicators, the indicator 'offers more innovative services' with the highest

outer loading of 0.932 means that the innovation strategy is reflected by 'innovative services'. For

variables, business performance is measured by three-five indicators namely the level of savings

growth, credit growth, profit growth, the level of customer satisfaction and always maintaining

service quality. The indicator that has the highest outer loading is credit growth with a value of 0.923,

meaning that the performance of the LPD business is reflected by credit growth. This result is also

following respondents' evaluation of the innovation strategy which is also considered good with an

average score of 3.93. Likewise, for business performance, it was considered high by respondents

with a score average of 4.11.


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The results of this study are by research Giantari et al. (2018), Hilmi et al. (2010), Kalkan et al.

(2014), Rhee et al. (2010), Semuel et al. (2017), and Zehir et al. (2015). Research results Giantari et al.

(2018) stated that the innovation strategy had a significant positive effect on the performance of the

textile industry SMEs in Bali. Research conducted on 60 textile SME entrepreneurs in Bali also

found that innovation is a partial mediating variable between market orientation and business

performance of textile SMEs in Bali.

The Effect of Differentiation Strategy on LPD Business Performance

Differentiation strategy has a positive significant effect on LPD business performance in

Badung Bali, Indonesia District, meaning that the better the differentiation strategy undertaken by

the Badung Bali, Indonesia Regency LPD, the higher the business performance. The business

strategy is measured by using 4 (four) indicators of differentiated products, differentiated

personnel, differentiated services, and differentiated image. Indicators that have the outer loading

highest are personnel differentiation with a value of 0.902 while business performance is reflected

by credit growth. The results of the respondents' assessment of the differentiation strategy also

showed good results with an average rating score of 3.68 while the average for assessing business

performance also showed a high value of 4.11.

The results of this study are consistent with studies conducted by Anggraini &

Sukaatmadja (2015), Banker et al. (2014), Nyokabi et al. (2019) and Semuel et al. (2017). Study

conducted by Banker et al. (2014) found that the differentiation strategy was more strongly related

to the company's sustainable performance than the cost leadership strategy. In this research,

differentiation as a source of company sustainability is also reviewed and can increase revenue

volatility. Kotler and Keller (2012: 384-388) state that a differentiation strategy consisting of product

differentiation, price differentiation, distribution differentiation, and image differentiation can

improve company performance. Tampi (2015) also states that the differentiation strategy has a

significant positive effect on Telkomsel's business performance.

Effect of Partnership Strategy on LPD Business Performance

Partnership strategy has a positive and significant effect on business performance with a p-

value of 0.021, meaning that the better the partnership strategy applied by the Badung Bali,

Indonesia LPD, the higher the LPD business performance in Badung Bali, Indonesia. Partnership

strategies are measured using three dimensions, namely partnerships with suppliers, partnerships

with competitors, and partnerships with customers. Each variable latency is measured using several

indicators. Partnerships with suppliers are measured by using information exchanges with

suppliers, supplier participation in determining interest rates, supplier participation in increasing

HR competencies. Partnership with customers is measured using three indicators, namely periodic

customer contact, sharing information with customers, providing increased knowledge with

customers. Competence with competitors is measured using three indicators, namely mutual

assistance in providing funds, sharing information with debtors and jointly carrying out social

activities.

Of the three dimensions, the partnership with the customer has the highest outer loading

(0.900) so that it is concluded that the partnership with the customer is an indicator that reflects the

partnership variable. While on business performance, the indicator of profit growth has the highest

outer loading (0.923). This result is also by respondents' assessment of the partnership variable with

an average that is already good with the score an average of 3.91) and respondents' ratings of

business performance are also highly rated by respondents with a score average of 4.11.


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The results of this study are by research studies Mustikaningsih et al. (2019) which explains

that in improving business performance, strategic partnerships need to be carried out optimally

through various efforts including strengthening collaboration in aligning supply chains and

developing dynamic capabilities in renewable energy industry companies in Indonesia. Also,

research conducted by Anggraini & Sukaatmadja (2015) explained that the application of

partnership strategies had an impact on improving culinary business performance in the city of

Denpasar, which means that the partnership strategy had a significant positive effect on business

performance. Research Sukwadi et al. (2013) found that the partnership strategy had a significant

positive effect on the performance of garment SMEs in Central Java. This study also explained the

importance of supply chain readiness for garment SMEs because it affects the performance of the

company's supply chain. In contrast to the results of Margaretha's study (2007) which said the

partnership did not produce a positive influence on bank performance.

6. Conclusion

LPDs should provide innovative services namely 1) always looking for breakthroughs so

that they are different compared to BPRs, cooperatives and other financial services; 2) have friendly

and competent personnel (employees) in their fields so they can provide service excellence, and 3)

LPDs should always establish partnerships with customers. Theoretical implications of the results

of this study are expected to be able to enrich the Strategic Management theory related to business

performance. This study also clarifies the relationship between the variables of innovation strategy,

differentiation strategy and partnership strategy on business performance. This research conducted

on the LPD in Badung Bali, Indonesia cannot be generalized to a wider area. This research was

conducted at a certain point of time (cross-section), while the environment is always changing,

especially government policies, competitors, technological advancements so it is important to do in

the future.

From the discussion of research results, the following conclusions can be drawn: 1)

Innovation strategy, differentiation strategy and partnership strategy have a significant positive

effect on LPD business performance in Badung Bali, Indonesia, meaning that the better the

innovation strategy, differentiation strategy and partnership strategy carried out, the higher LPD

business performance in Badung Bali, Indonesia. The advice that can be given 1) LPDs in Badung

Bali, Indonesia should offer unique products that are not offered by competitors, 2) LPDs need to

increase product differentiation and personnel differentiation, meaning that LPDs in Badung Bali,

Indonesia need to offer different and new products compared to other LPDs and need to improve

employee competence and 3) In determining interest rates it is important to also pay attention to

input from the community as suppliers of funds.

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